Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Alameda County Super. Ct. No. RG04173862
Haerle, J.
I. INTRODUCTION
Appellants Daniel and Alan Hasso appeal from a judgment dismissing their second amended complaint against respondents County of Alameda and several of its agencies and officials after that court had sustained respondents’ demurrer to that complaint without leave to amend. Appellants contend the trial court erred in holding that they lacked standing to sue for a refund of real property taxes one of them had paid during a period when there was an automatic stay of pending actions because of a bankruptcy proceeding involving an entity which had previously owned the properties in question. We agree with the trial court’s holding and hence affirm its judgment.
II. FACTUAL AND PROCEDURAL BACKGROUND
In July 1993, a corporation known as La Sierra Financial Services, Inc. (La Sierra) acquired title to four properties in Alameda County. The real property taxes on these properties are the subject of this litigation. In October of that year, a deed of trust was recorded by which La Sierra, the trustor, named appellant Daniel Hasso (Daniel) as the beneficiary of the deed of trust as to all four of the properties. (A title insurance company was named as trustee.)
On April 14, 1994, La Sierra became the subject of a Chapter 7 bankruptcy petition in federal bankruptcy court; in October 1994, that petition was converted into a Chapter 11 petition. A plan pursuant to Chapter 11 was apparently not approved by the bankruptcy court until January 2002.
In the refund claim attached to the operative complaint, appellants cite to an earlier bankruptcy action filed by an entity identified as “Berkeley on Durant,” an action allegedly filed in February 1990 and pending until April 1993. But the operative complaint nowhere makes any allegations regarding the relevance of that bankruptcy filing to this litigation.
Via a process unstated in appellants’ operative complaint (their second amended complaint), and at a time also unspecified therein, Daniel became the owner of all four properties. During the 12 tax years starting in July 1989 and ending in June 2001, respondent County of Alameda allegedly “wrongfully assessed” real property taxes on these properties and recorded liens for those taxes.
In 1998, Alan Hasso (Alan) allegedly, but again via a process not specified in the complaint, became the assignee of the rights of the La Sierra bankruptcy estate, and the two Hassos thereafter allegedly “agreed to join their rights.”
In September 2000, Daniel sold the four properties to an entity known as Aldar Investment “with a credit in escrow” for the then-unpaid taxes.
On or about June 1, 2004, Daniel filed a claim with the County of Alameda for a refund of those taxes and penalties. No refunds apparently having been received, on September 7, 2004, he filed the original complaint in this action, asserting a single cause of action against the Alameda County Treasurer and Tax Collector. It sought a refund of the taxes and penalties paid in the amount of slightly over $336,000, plus prejudgment interest and attorneys fees. That complaint asserted that the automatic stay in bankruptcy provided by federal law (see 11 U.S.C. § 362, hereafter section 362) prevented any lien for real property taxes from attaching, and thus alleged that the taxes should have been asserted as unsecured claims in the La Sierra bankruptcy action.
Apparently before any response to this complaint was filed, on January 7, 2005, Daniel filed a first amended complaint which added the County of Alameda and its Board of Supervisors as named defendants, but made essentially the same allegations. On March 24, 2005, the superior court (the Honorable Steven Brick) sustained the defendants’ demurrer to that complaint, albeit with leave to amend, on the ground that Daniel “is without standing to challenge real property tax and penalty liens against the subject property” because he was “neither the debtor nor the trustee.” The court cited several federal and state court cases in support of its holding.
On April 11, 2005, both appellants filed their second amended complaint. This complaint alleged two causes of action, the first for “Violation of Automatic Stay” and the second for a “Refund of Taxes that were Wrongfully Assessed and/or Collected.” The defendants again demurred, and this time the trial court sustained the demurrer without leave to amend on, again, the basis that appellants lacked standing. It also added, as an additional basis, that appellant Alan was “not alleged to have paid the property taxes in question, and is not otherwise alleged to have been damaged in any way.”
Judgment in favor of respondents was entered on July 11, 2007. Appellants filed a timely notice of appeal.
III. DISCUSSION
We deal first of all with the simplest issue presented: the standing of Alan to sue for a refund of the taxes, i.e., the claim stated by the second cause of action. The operative complaint specifically alleges that “Daniel Hasso is the individual who paid the wrongfully assessed taxes.” That being the case, Alan has no standing to sue for a refund of these taxes, no matter whether or not he is a “successor-in-interest” to any right previously held by the bankruptcy estate. This much is made clear by the express terms of Revenue and Taxation Code section 5140, which provides: “The person who paid the tax, his or her guardian or conservator, the executor of his or her will, or the administrator of his or her estate may bring an action only in the superior court, but not in the small claims division of the superior court, against a county or a city to recover a tax which the board of supervisors of the county or the city council of the city has refused to refund on a claim filed pursuant to Article I (commencing with Section 5096) of this chapter. No other person may bring such an action, but if another should do so, judgment shall not be rendered for the plaintiff.” (Rev. & Tax. Code, § 5140.)
Further, and as noted above, how Alan is at all involved in the four properties is very unclear from the operative complaint. All it alleges is that he “is the successor-in-interest to that right or chose in action to enforce a violation of the automatic stay.” We have no idea what this means.
Cases decided under this statute make clear that it means exactly what it says. (See, e.g., the decision of Division Five of this District in IBM Personal Pension Plan v. City and County of San Francisco (2005) 131 Cal.App.4th 1291, 1300-1305.) As a consequence, appellant Alan clearly lacks standing to bring the second cause of action for tax refunds.
Which leaves the standing of Daniel and the pertinence of the first cause of action alleging negligent or willful violation of the automatic stay in bankruptcy. We conclude, as did the trial court, that (1) Daniel also lacks standing under the second (tax refund) cause of action because his relationship to the bankruptcy proceeding was that of a creditor only and (2) the entire first cause of action fails because section 362 is inapplicable to appellants.
And will, hereafter, be inapplicable to any and all claims involving such liens. In 1994, the Congress passed an amendment to section 362(b) adding a subdivision (18) to that statute; it specifically makes the automatic stay of section 362(a) inapplicable to “statutory lien[s] for an ad valorem property tax . . . imposed by a governmental unit . . . .” (§ 362(b)(18).) However, that amendment was specifically made inapplicable to bankruptcy petitions filed before the date of its enactment. (Pub. L. 103-394, § 702(b), 108 Stat. 4141.). According to the record before us, La Sierra’s first bankruptcy petition was filed on April 14, 1994.
Interestingly enough, some relatively early pertinent case law on the subject of who can and who cannot assert the protection of section 362’s automatic stay provision is found in our own state reports. One such case was published in 1988 by Division Three of this court; it is Campbell v. Lauigan (1988) 202 Cal.App.3d 651 (Campbell). In it, Justice Barry-Deal, writing for a unanimous court, affirmed a ruling of the Alameda County Superior Court which had held that a grantee of realty, who had acquired it via a quitclaim deed from a trustee in bankruptcy, lacked standing to rely on the predecessor statute to section 362 as the basis for a quiet title action to void the sale of the realty for non-payment of property taxes. The court summed up the rule––precisely the same rule applied by the Alameda court here––thusly: “It is fundamental under federal bankruptcy law that the automatic stay operates for the benefit of the debtor and trustee only, and gives other parties interested in property affected by the automatic stay no substantive or procedural rights. [Citations.] If the debtor or trustee chooses not to invoke the protections of the automatic stay, no other party may attack any act in violation of the automatic stay. [Citation.]” (Campbell, supra, 202 Cal.App.3d at p. 656.) Based on this principle, and its application by many federal bankruptcy courts, the Campbell court concluded that the appellant, as a “third party grantee has no authority to attack the conveyance or sale as null and void . . . .” (Id. at p. 659.)
In 1991, our colleagues in the Fifth District cited Campbell in another case raising the issue of standing to raise the issue of the application of the automatic stay. In Shorr v. Kind (1991) 1 Cal.App.4th 249 (Shorr), that court reversed a ruling of the Kern County Superior Court which had sustained a demurrer to a cross-complaint against both a lawyer and his client alleging malicious prosecution. The defendant-lawyer’s demurrer was based on the premise that his client had filed a petition in bankruptcy before the underlying action had been terminated by summary judgment and that, therefore, that termination was invalid under section 362. The Fifth District rejected this argument, again holding that “standing to challenge a violation of the automatic stay rule is limited solely to beneficiaries of the stay order.” It then quoted the key language noted above from Campbell, thus effectively holding that the only “beneficiaries” of a stay order are the trustee and the debtor––but the latter only if the relevant action is brought against it or him. (Shorr, supra, 1 Cal.App.4th at p. 258.)
Also holding that the automatic stay provision may be invoked by the debtor only if the action is against that party, and not if he, she or it is the one who brings the action is Shah v. Glendale Federal Bank (1996) 44 Cal.App.4th 1371, 1374-1376.
The first times this issue arose before it, the Ninth Circuit Court of Appeals cautiously avoided defining who did and who did not have standing to invoke section 362’s automatic stay provision. In two cases decided in 1989, it deferred deciding whether “creditors of an estate may invoke the protections of section 362,” although suggesting that such a proposition was “questionable.” (In re Globe Investment and Loan Company, Inc. (9th Cir. 1989) 867 F.2d 556, 559 (Globe); see also, In re Brooks (9th Cir. 1989) 871 F.2d 89, 90 (Brooks).) However, in both of those cases, it made clear that parties who were neither (a) creditors of the estate, (b) the trustee of the estate, or (c) the debtor, i.e., the party in bankruptcy, could not invoke the automatic stay provisions of section 362.
Hereafter we will be citing only federal authorities from the Ninth Circuit. We fully understand that, as a state court, we are not “bound” by federal precedent. However, common sense suggests that it would be a bit troublesome for California law and Ninth Circuit law to vary regarding application of a significant provision of the federal bankruptcy code.
In Globe, the parties attempting to invoke the stay were the co-owners of property with a Chapter 7 debtor, who were attempting to challenge the sale of the debtor’s interest in the jointly-owned property. (Globe, supra, 857 F.2d 556.) In Brooks, it was the trustee of a wife’s 1986 bankruptcy petition, who was attempting to avoid a deed of trust re-recorded (in apparent violation of the automatic stay) by her husband’s bank two days after he filed for bankruptcy in 1985. (Brooks, supra, 871 F.2d. 89.)
However, two years later the Ninth Circuit made its position absolutely clear on this point in a case cited by the trial court and relied on by respondents in their brief to us, In re Pecan Groves of Arizona (9th Cir. 1991) 951 F.2d 242 (Pecan Groves). In that case, there were three bankruptcy filings “by or on behalf of Pecan Groves.” In the third such filing, “the Chapter 7 Trustee sought to avoid a trustee’s sale which took place in violation of the automatic stay under the first bankruptcy proceeding.” Two creditors were allowed to intervene on the side of the trustee, but the bankruptcy court ruled in favor of the purchasers of the property, i.e., against the trustee and the intervening creditors. The trustee did not appeal to the Ninth Circuit, but the creditors did. That court affirmed the bankruptcy court on the ground that those creditors had no standing to appeal an adverse decision regarding the automatic stay in bankruptcy. (Pecan Groves, supra, 951 F.2d at p. 242.)
In so holding, the Ninth Circuit wrote as follows: “In previous cases, we have reserved the question of whether a creditor can attack violations of the automatic stay. [Citation.] While there is no precedent on point in the Ninth Circuit, the majority of jurisdictions which have considered standing under the automatic stay provision, 11 U.S.C. § 362, have concluded that section 362 is intended solely to benefit the debtor estate. [Citation.] Language from many cases indicates that, if the trustee does not seek to enforce the protections of the automatic stay, no other party may challenge acts purportedly in violation of the automatic stay. [Citations.] [¶] The trustee is charged with the administration of the estate for the debtor’s and creditor’s benefit. Allowing unsecured creditors to pursue claims the trustee abandons could subvert the trustee’s powers. Granting claimants like [the appealing creditors] standing will overburden the bankruptcy courts with litigation. Here, the trustee has not appealed the adverse ruling of the trial court. No other party may challenge this ruling. We therefore hold that a creditor has no independent standing to appeal an adverse decision regarding a violation of the automatic stay.” (Pecan Groves, supra, 951 F.2d at p. 245.)
One of the creditors also argued that “because he holds a lien against this property, he is different than an ordinary creditor and should be allowed to attack the violation of the automatic stay.” (Pecan Groves, supra, 951 F.2d at p. 245.) The Ninth Circuit rejected this argument, too, citing Globe for the proposition that “the stay does not protect the rights of outside parties,” and especially––as in that case and the instant case––those parties “with interests adverse to the estate.” (Pecan Groves, supra, 951 F.2d at p. 245.)
The Ninth Circuit has reaffirmed this core holding of Pecan Groves three times since the issuance of that decision. (See In re P.R.T.C., Inc. (9th Cir. 1999) 177 F.3d 774, 777-778; In re Franck (9th Cir. 1994) 1994 U.S.App. LEXIS 5461; In re Marinkovic (9th Cir. 2005) 158 Fed.Appx. 885, 2005 U.S.App. LEXIS 27932.)
This rule has most recently been applied by the United States District Court for the Northern District of California in Sanchez v. Torres (N.D.Cal. 2008) 2008 U.S. Dist. LEXIS 32630, where an in pro per plaintiff was attempting to sue a whole host of defendants alleging violation of her civil rights. She asserted, among other things, that their actions had caused her to lose title to a Monterey County property she owned with another person. One of her arguments was that the co-owner had filed for bankruptcy before title to the property passed to another person. The district court, citing Globe among other authorities, rejected this argument, stating: “[I]n the Ninth Circuit, section 362 has been held to apply only to the benefit of the debtor estate. Owners (other than the debtor) of the property at issue in a bankruptcy action do not have standing to assert violation of the automatic stay under 11 U.S.C. § 362.” (Id. at p. 5.)
We sum up these authorities thusly: the automatic stay of section 362 is intended to, and operates to, protect from liens, etc., properties of the debtor and, after the filing, properties under the control of the bankruptcy trustee. The beneficiaries of that stay are, therefore, the debtor and the bankruptcy estate, represented by its trustee. Others, specifically including creditors of the debtor and/or the bankruptcy estate and other “outside parties,” lack standing to invoke the protection of the automatic stay of that statute.
Appellants try to avoid this rule by a host of arguments, many of them bordering on sleight-of-hand. First of all, they take pains to avoid addressing the governing law, cited above, regarding the issue of standing to contest the application of section 362’s automatic stay. Thus, their attempt to distinguish the very specific holding in Pecan Groves relies mainly on holdings of inferior federal courts or the courts of other states that suggest that, in some circumstances, creditors may also avail themselves of the benefits of the automatic stay. When appellants directly address Pecan Groves, they assert that it did not constitute a “determination that creditors are not beneficiaries of the automatic stay.” We respectfully submit that a reading of the core holding of that case, quoted above, totally undermines that argument.
Similarly, appellants pay scant attention to the holding of this District in Campbell, stating only that it did not involve a “pre-petition creditor.” At another point in their opening brief, appellants suggest that, if they lack “direct standing, there was derivative standing as a result of the assignment by the bankruptcy estate of its rights with regard to any violation of the automatic stay.” But nowhere is the term “derivative standing” defined or explained nor, as noted in footnote 2, ante, is there any explanation or citation to the supposed “assignment,” much less an exhibit or attachment to the complaint reflecting any such “assignment.”
Appellants cite to Wilson v. S.L. Rey, Inc. (1993) 17 Cal.App.4th 234, 240, in support of their position that creditors can invoke the automatic stay, but the page cited only contains a brief recitation of an earlier writ ruling by the appellate court in question, and absolutely no discussion of the “standing” issue. And regarding their “pre-petition creditor” argument, nowhere do appellants cite any case suggesting that the principles articulated in Campbell, Shorr, Pecan Groves or Sanchez vary as and when the claimant is a “pre-petition creditor.”
In a two-paragraph declaration attached to appellants’ opposition to respondents’ demurrer to the second amended complaint, Alan alleged that he was “an assignee of the rights of the trustee for the bankruptcy estate of La Sierra Financial Services, Inc.,” and then noted that he was “willing to assign my claim to Daniel Hasso if there is any problem with including me as a plaintiff in this case.” However, and as the trial court specifically recognized, such is not “a substitute for proper pleading”––besides being both very vague and general––and we will not consider it.
Appellants’ reply brief contains even less discussion of the authority noted above; indeed, our examination of it discloses that it uses the term “standing” only once, when they assert: “It is only as to attorney fees, costs, and punitive damages that the issue of standing with regard to a violation of the automatic stay becomes relevant.” This is so, that brief argues, because there is ample federal and California precedent to the effect that a lien filed during the period of the automatic stay is “void” as distinguished from “voidable.” (See, e.g., In re Marriage of Sprague & Spiegel-Sprague (2003) 105 Cal.App.4th 215, 219, citing In re Gruntz (9th Cir. 2000) 202 F.3d 1074, 1082 (Gruntz).) Gruntz did indeed so hold, but in the context of ruling that a state criminal proceeding was not subject to the automatic stay. However, nothing in that holding, or the similar cases it relies upon, suggests that the principle of Pecan Groves with regard to standing to raise the issue of the applicability of section 362 was changed at all by Gruntz. Put another way, no case cited by appellants, federal or California, suggests that even if a lien imposed during the pendency of a bankruptcy is “void” as distinguished from “voidable,” such a position may be asserted by a creditor, even a “pre-petition creditor.”
Appellants also cite Musser v. Provencher (2002) 28 Cal.4th 274, 277, for this proposition, but in doing so (1) miscite it as “29 Cal.4th” and (2) ignore the fact that, at the correct page, our Supreme Court was only reciting––as a part of the statement of facts––what an earlier unpublished decision of a court of appeal had held.
In their briefs to us, appellants cite several cases from, for example, New Jersey, Louisiana, and other federal circuits. For the reason noted in footnote 5, ante, we will not discuss or analyze federal cases from outside the Ninth Circuit. And because California state court precedent is clear on the issue involved, there is no need for us to discuss or analyze cases from other state courts, either.
Appellants contend that an even more recent opinion of the Ninth Circuit somehow detracts from the holding of Pecan Groves regarding who has standing to assert the automatic stay in bankruptcy. The case they rely upon is In re Glasply Marine Industries, Inc. (1992) 971 F.2d 391 (Glasply). Their reliance is utterly misplaced, as Glasply has nothing whatsoever to do with the issue of “standing” to raise the automatic stay issue. Indeed, we cannot find either the word “standing” or any of the prior Ninth Circuit authorities cited above (e.g., Pecan Groves, Globe, etc.) mentioned at all in it. Glaspy simply held that the attempts of a Washington State county to secure payment of real property taxes levied on the property of the bankrupt were subject to the automatic stay and, thus, after the close of the bankruptcy case, became unsecured claims that did not have priority over a mortgage that had been secured before the filing of the bankruptcy. (Glasply, supra, 971 F.2d at pp. 394-395.) Thus, Glasply involved only a creditor-priority issue, and not the standing issue presented here.
Finally, in their reply brief appellants cite, and indeed attach, an unpublished opinion of the Ninth Circuit, Historical Properties, Inc. v. County of San Diego (1997) 1997 WL 759545 which, they say, supports their position. This case was never cited in appellants’ opening brief to us but, in any event, it does not support appellants’ argument regarding the standing of creditors to contest section 362’s stay. That case held that tax liens the County of San Diego attempted to attach to a piece of real property then a part of a bankruptcy estate were “void” from the inception and, thus, did not exist when, after the conclusion of the bankruptcy, the property was transferred to another owner. This is simply not the factual situation presented here.
Simply stated, this litigation is between two creditors of La Sierra. Creditor No. 1 is the County of Alameda which, not surprisingly, wanted the real property taxes it had levied on La Sierra’s four properties in that county paid. Creditor No. 2 is Daniel, the original mortgagee for La Sierra, who ultimately paid those taxes and now wants the monies he paid refunded by Creditor No. 1. Under clear precedent from California appellate courts and the Ninth Circuit Court of Appeals, this is not the sort of controversy the automatic stay provision of section 362 was intended to resolve.
IV. DISPOSITION
The judgment is affirmed.
We concur: Kline, P.J., Richman, J.