Slaieh v. Simons
Slaieh v. Simons
Opinion of the Court
Before the Court is Appellants Nabeel Naiem Slaieh and Joanne Fraleigh's ("Appellants") appeal from the bankruptcy court's June 28, 2017 order granting with prejudice Defendant Larry D. Simons's Motion to Dismiss. (Dkt. No. 9; see also Defendant's Excerpts of Record ("DER") Ex. 177.) Having reviewed the parties' briefing and the record before the bankruptcy court, the June 28, 2017 order is AFFIRMED .
I. BACKGROUND
Appellant, the debtor in the underlying bankruptcy proceeding, filed a voluntary petition for relief under Chapter 7 of Title 11 of the United States Code on December 18, 2013. (DER Ex. 22.) That same day, the bankruptcy court appointed Larry D. Simons as Chapter 7 trustee ("Trustee") of Appellant's Estate. Among the assets in Appellant's bankruptcy Estate was his principal residence located at 40834 Baccarat Road, Temecula, California (the "Property"). (DER Ex. 22 at 35.)
Pursuant to his statutory duties to liquidate assets of the Estate, the Trustee marketed the Property for sale. See
*34The appeal of the Sale Order was later dismissed for failure to prosecute.
On July 13, 2016, the United States Marshals Service posted a notice to vacate at the Property, instructing all occupants to vacate by July 20, 2016, at 12 p.m. (DER Ex. 148 at 7,058.) On July 19, 2016, Ms. Fraleigh, Appellant's wife, filed a complaint in the Superior Court of California, County of Riverside, for quiet title, declaratory and injunctive relief, and violation of California Business and Professions Code section 17200 et seq. (DER Ex. 148 at 7,022-7,124.) She also sought a temporary stay of the eviction proceedings. (Id. ) Ms. Fraleigh claimed that the sale could not proceed because Appellant transferred the Property to her via interspousal transfer deed, recorded on or about May 11, 2016. (Id. at 7,055-56.) In opposition, Trustee argued that this purported transfer was without the bankruptcy court's approval, and constituted an unauthorized post-petition transfer under
Appellant and his family were subsequently evicted from the Property. Upon eviction, the Trustee discovered that various doors and windows had been removed from the Property; Appellant and Ms. Fraleigh were asked to return these items since they were part of the bankruptcy Estate and part of the realty being sold pursuant to the Sale Order. Appellant claims he and Ms. Fraleigh were not involved in the removal of these fixtures.
On August 23, 2016, the bankruptcy court issued an Order to Show Cause as to why Ms. Fraleigh and her attorney, Mr. Saba-who is also Appellant's attorney in the bankruptcy proceeding-should not be held in contempt for knowingly and willfully violating the automatic stay with their state court filings. (See DER Ex. 156 at 7,373-74.) After reviewing Ms. Fraleigh's and Mr. Saba's oppositions to the Order to Show Cause, the court determined sanctions were appropriate. The court imposed a fine of $39,205.49 and dismissed the state court action. (DER Ex. 158 at 7,387-95.)
On August 31, 2016, Trustee filed a Complaint against Appellant and Ms. Fraleigh. (DER Ex. 159 at 7,424-7,942.) In the Complaint, Trustee seeks a judgment for avoidance and recovery of the unauthorized post-petition transfers pursuant to
On December 16, 2016, Appellant and Ms. Fraleigh filed their first counter complaint against Trustee, alleging: (1) breach of contract; (2) fraud and deceit; (3) extortion; (4) conversion; (5) defamation, slander per se ; (6) negligence; (7) breach of fiduciary duties; (8) violation of California Business and Professions Code § 17200 ; (9) intentional infliction of emotional distress; and, (11) wrongful eviction. (Appellant's Excerpts of Record ("AER") Ex. 1.) Two factual scenarios appear to form the basis of these claims. First, in May and *35June of 2016, counsel for Appellant and Trustee allegedly engaged in negotiations regarding the sale of the Property. According to Appellant, he offered to purchase the property for $435,000 and Trustee counter-offered to sell the property for $635,000. (AER Ex. 1 at 3.) Appellant contends he agreed to purchase the property for $635,000. (Id. ) Appellant further argues that Trustee then refused to sell him the Property for that price and demanded Ms. Fraleigh pay an additional $75,000 "to teach her a lesson" for filing the state court action discussed above. (Id. ; see also DER Ex. 164 at 8,051.) The second situation involved the enforcement of the bankruptcy court's Sale Order. After Appellant's unsuccessful appeal of the Sale Order, an eviction notice was posted on the Property. Following the determination of Ms. Fraleigh's state court action, the United States Marshals Service evicted Appellant and his family. According to Appellant, he was given thirty minutes to collect personal property, and about a week later, obtained permission to return and collect additional personal property. (See AER Ex. 1 at 7.) When he returned, he realized certain expensive items were missing. However, Appellant acknowledged that many doors and windows were missing prior to his eviction. (See
On January 17, 2017, Trustee moved to dismiss the first counter complaint asserting, among other things, that he and his professionals are entitled to quasi-judicial immunity for the acts alleged. (DER Ex. 159 at 7,396-8,002.) On January 18, 2017, Ms. Fraleigh voluntarily dismissed her counter complaint. (DER Ex. 164 at 8,050.) The court held a hearing on the motion on February 15, 2017. (Simons v. Slaieh , Adv. No. 6:16-ap-01224-MH, Dkt. No. 35.) Thereafter, on February 24, 2017, the court dismissed all of Appellant's claims with prejudice, except for the fifth claim for defamation and slander per se , which was dismissed without prejudice. (DER Ex. 164.) The court held that all of Appellant's claims were insufficiently pled, appellant lacked standing to assert certain claims, and that Trustee and his professionals were entitled to quasi-judicial immunity with regard to actions taken in relation to the sale of the Property. (Id. at 8,055-63.) The court gave Appellant until March 7, 2017, to file an amended counter complaint. (See
The bankruptcy court's June 19 order forms the basis of the instant appeal; however, Appellant's Opening Brief also challenges the court's dismissal of the causes of action in Appellant's original counter claim. (See Dkt. No. 9, Appellant's Opening Brief ("AOB").) The Court will discuss each of the counterclaims in turn.
II. LEGAL STANDARD
District courts have jurisdiction to hear appeals from, inter alia , "final judgments, order, and decrees" of the bankruptcy courts.
Appellate courts review de novo the grant of a Rule 12(b)(6) motion to dismiss. Knievel v. ESPN ,
The bankruptcy court's conclusions of law regarding the immunity of a trustee are also reviewed de novo, while findings of fact are reviewed for clear error. In re Jercich ,
The court generally may not consider materials other than facts alleged in the complaint and documents that are made a part of the complaint. Anderson v. Angelone ,
III. DISCUSSION
A. First Claim for Breach of Contract
In his first claim, Appellant alleges that Trustee breached their contract for sale when he refused to sell the Property to Appellant. The elements of breach of contract are (1) the existence of a contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) resulting damages to the Plaintiff. Oasis v. West Realty, LLC v. Goldman ,
Further, as the bankruptcy court noted, a bankruptcy trustee generally cannot enter into a valid contract for sale of estate property without court approval. See
B. Second Claim for Fraud and Deceit and Third Claim for Extortion
Appellant's second and third claims stem from certain interactions between Trustee and Ms. Fraleigh. Trustee claims that Appellant lacks standing to assert these claims because the alleged harm was to Ms. Fraleigh, not Appellant. (Dkt. No. 12, Appellee's Answering Brief ("AB") at 14-15.) Standing is the threshold question in every federal case, and a party generally cannot assert the claims of another. Warth v. Seldin ,
In his claim for fraud and deceit, Appellant alleges that he and Ms. Fraleigh were injured when Ms. Fraleigh "had to fly to Canada to liquidate whatever amount of money in her bank accounts within which to purchase the Property." (AER Ex. 1 at 5.) Although the factual allegations in the cross complaint refer to actions taken and money spent by Ms. Fraleigh, Appellant argues in his Opening Brief that because the couple was married, he has a legal right to claim the expenditure of her trip to Canada as his own damages. (AOB at 15.)
Under California law, the "indispensable elements of a fraud claim include a false representation, knowledge of its falsity, intent to defraud, justifiable reliance, and damages." Vess v. Ciba-Geigy Corp., USA ,
Similarly, Trustee argues that appellant lacks standing to assert this third claim for extortion. The amended cross *38complaint alleges that Trustee demanded Ms. Fraleigh pay an additional $75,000, and as a result, she has suffered damages. (AER Ex. 1 at 6-7.) In his Opening Brief, Appellant does not address the bankruptcy court's ruling but merely states that Ms. Fraleigh dismissed her counter claim as a result of alleged harassment and threats by Trustee. (AOB at 15-16.) There is no evidence in the record that Trustee or his professionals harassed or threatened Ms. Fraleigh. Further, even if there was, this does not explain why Appellant would be permitted to assert this claim; he does not allege that he personally suffered an injury from Trustee's purported demand that Ms. Fraleigh pay an additional $75,000 for the Property. Accordingly, the Court AFFIRMS the dismissal of Appellant's extortion claim.
C. Fourth Claim for Conversion
In his cross complaint, Appellant states that he returned to his house approximately one week after he was evicted, only to discover that certain expensive items of personal property were missing. (AER Ex. 1 at 7.) Appellant argues that Trustee "failed to 'board up' or replace the missing windows and doors to prevent entry into the Debtor's Property by outsiders." (Id. ) Accordingly, Appellant contends that Trustee and his professionals intentionally interfered with his personal property, and such interference deprived Appellant of possession and use of the property at issue. (Id. at 8.)
The elements of conversion are (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by wrongful act inconsistent with the property rights of the plaintiff, and (3) damages. In re Emery ,
Plaintiff's allegations are insufficient to state a claim for conversion. Appellant does not allege that Trustee exercised control over the personal property or applied it to his own use. Indeed, the cross complaint alleges that the property was stolen by outsiders, revealing that Trustee did not apply the personal property to his own use. (AER Ex. 1 at 7.) Further, the Sale Order authorized Trustee to evict Appellant and other occupants if still present after June 7, 2016, and authorized the Trustee to move personal property to a moving truck. (DER Ex. 129 at 4,691-92.) Thus, any exercise of control over the Property by way of eviction, or over Appellant's personal property if moved into a moving truck, would not have been wrongful. Regardless, it does not appear that Trustee actually assumed control or ownership over Appellant's personal property, since the option to hire a moving truck was not exercised. Neither does failing to board up the missing windows and doors constitute a "wrongful act" by Trustee. The windows and doors were missing prior to Appellant's eviction, and Appellant advances no support for his contention that Trustee should have improved the Property by making such replacements following the eviction. Accordingly, the Court AFFIRMS the dismissal of Appellant's conversion claim.
D. Appellant's Slander and Defamation Claims
Appellant asserted a claim for defamation and slander per se as his fifth *39claim for relief in his original counter claim. (AER Ex. 1 at 8.) This claim was dismissed without prejudice, and Plaintiff's amended counter claim asserted slander and defamation as the first and second claims, respectively. (See Simons v. Slaieh , Adv. No. 6:16-ap-01224-MH, Dkt. No. 39.) To prevail in a defamation claim under California law, a plaintiff must allege "(a) a publication that is (b) false, (c) defamatory, and (d) unprivileged, and that (e) has a natural tendency to injure or that causes special damage." Bowen v. M. Caratan, Inc. ,
The bankruptcy court originally dismissed Appellant's defamation and slander claim because he failed to plead publication. (DER Ex. 164 at 8,058.) Although Appellant's amended counter claim cured the pleading defect as to the slander claim, the court found that Trustee was entitled to quasi-judicial immunity for this claim. (DER Ex. 177 at 8,752-54.) The court also held that Appellant did not have standing to assert his second defamation claim, which appeared to be based on slander of Ms. Fraleigh. (Id. at 8,752.)
"Bankruptcy trustees are entitled to broad immunity from suit when acting within the scope of their authority and pursuant to a court order." In re Harris ,
Trustee asserts immunity under the theory that bankruptcy trustees are entitled to quasi-judicial immunity for actions that are integrally related to the adjudication of the bankruptcy case. Lonneker Farms, Inc. v. Klobucher ,
All four elements required to establish quasi-judicial immunity are satisfied here. First, as the bankruptcy court noted, all of Trustee's actions related to the sale of the Property and Appellant's eviction were within the scope of Trustee's duties. One of Trustee's primary duties under
Second, Appellant clearly had notice of Sale Order and pending eviction. Appellant opposed and attempted to appeal the Sale Oder, and was given notice of the eviction via the Sale Order and the eviction notice posted on the property. To the third and fourth elements, Trustee candidly disclosed to the bankruptcy court its proposed actions and the court approved and issued the Sale Order. Therefore, all four elements are satisfied. Accordingly, because the Court finds that all four requirements are met, and that the statements at issue were made during Trustee's attempt to prosecute the Sale Order-an act "essential to the authoritative adjudication of private rights to the bankruptcy estate"-it AFFIRMS the dismissal of Appellant's defamation and slander claims on quasi-judicial immunity grounds. See In re Castillo ,
E. Appellant's Sixth Claim for Negligence
With this claim, Appellant argues that Trustee's failure to board up the missing windows and doors constituted negligence. (AER Ex. 1 at 9.) In California, the elements of negligence are (1) a legal duty to use due care, (2) breach of that duty, and (3) the breach as the proximate or legal cause of the resulting injury. Ladd v. Cnty. of San Mateo ,
First, Trustee argues that his duties under
First, the Court notes that the only damages alleged in the counter complaint are Ms. Fraleigh's damages. As explained above, Appellant lacks standing to assert Ms. Fraleigh's claims. But, even assuming Appellant's allegations can be construed as pleading his own damages, Appellant has failed to show that Trustee owed him a duty to "board up" the Property. A trustee is charged primarily with conserving estate assets and maximizing distributions to creditors. See In re Rigden ,
F. Appellant's Seventh Claim for Breach of Fiduciary Duty
A claim for breach of fiduciary duty requires the following elements be shown: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damages. Gutierrez v. Girardi ,
First, to the extent Appellant is attempting to assert this claim on behalf of Ms. Fraleigh and the estate, the claim fails for lack of standing. See In re Stoll ,
G. Appellant's Eighth Claim for Violation of California Business and Professions Code Section 17200
California Business and Professions Code section 17200 states:
As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair deceptive, untrue or misleading advertising and any at prohibited by Chapter 1 (commencing with Section 17500 ) of Part 3 of Division 7 of the Business and Professions Code.
In his amended cross complaint, Appellant again contends that the "acts alleged herein" including "(a) Breach of Contract, (b) Extortion; (c) Conversion; (d) breach of fiduciary duties, (e) Breach of B & P Code section 17200, et seq. ; and (f) Negligence" form the basis of this claim. (AER Ex. 1 at 12.)
The bankruptcy court found this claim "redundant in that [Appellant] argues that the other causes of action form the basis for this cause of action." (DER Ex. 164 at 8,061.) The court also noted that the causes of action relied upon lacked merit or were barred by Trustee's quasi-judicial immunity, and the actions allegedly committed by Trustee "are not plausibly considered a 'business act or practice' within the meaning of the statute." (Id. ) In his Opening Brief, Appellant again asserts that the above-listed claims form the basis of this claim.
In Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. ,
Further, "a common law violation such as breach of contract is insufficient" on its own to support a claim under the unlawful prong of section 17200. Shroyer v. New Cingular Wireless Servs. ,
Lastly, the amended cross complaint lacks allegations to support the conclusion that the alleged conduct was unfair or fraudulent. California Courts of Appeal are split as to the test for what constitutes an unfair business practice. See Drum v. San Fernando Valley Bar Ass'n ,
Accordingly, the Court AFFIRMS the dismissal of Appellant's section 17200 claim.
H. Appellant's Ninth Claim for Intentional Infliction of Emotional Distress
A cause of action for intentional infliction of emotional distress ("IIED") exists where there is "(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress, (2) the plaintiff's suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant's outrageous conduct." Hughes v. Pair ,
Under California law, an action must be intentional or reckless to serve as the basis for an intentional infliction of emotional distress claim. It is not enough to simply allege inaction on the part of the defendant. See Spackman v. Good ,
*44Further, for conduct to be outrageous, it must be "so extreme as to exceed all bounds of that usually tolerated in a civil society." King v. AC & R Advertising ,
I. Appellant's Tenth Claim for Wrongful Eviction
Lastly, Appellant argues that he was wrongfully evicted because Trustee did not follow state eviction laws. (AER Ex. 1 at 16.) However, as the bankruptcy court noted, state eviction laws to not apply after a bankruptcy court enters an order directing surrender of the property. See George v. Cnty. of San Luis Obispo ,
Appellant also alleged that the order to sell the Property was based on fraud and misrepresentation by Trustee. However, Appellant provides no factual allegations with respect to what conduct Trustee engaged in procuring the Sale Order. Moreover, Appellant was unsuccessful in his attempt to appeal the Sale Order, and cannot use these bare allegations in an effort to collaterally attack that outcome. Lastly, based on the above analysis of Trustee's quasi-judicial immunity, Trustee is immune from this claim as the eviction was within the scope of Trustee's duties, was disclosed to Appellant and the court, and approved by the court. See infra Section III.E. Thus, the Court AFFIRMS the dismissal of Appellant's wrongful eviction claim.
J. Dismissal With Prejudice
Lastly, the Court finds dismissal with prejudice was appropriate. Leave to amend may be denied where there has been a repeated failure to cure the deficiencies by amendment previously allowed, or where amendment would be futile. See Foman v. Davis ,
IV. CONCLUSION
For the foregoing reasons, the Court AFFIRMS the bankruptcy court's order dismissing with prejudice Appellant's counter claims.
IT IS SO ORDERED.
The Court considered these exhibits because their authenticity is not disputed, Appellant has alleged the existence of the emails in the amended cross complaint, and the amended cross complaint necessarily relies on the emails to establish the contract. See Lee v. City of Los Angeles ,
Reference
- Full Case Name
- Nabeel Naiem SLAIEH and Joanne Fraleigh v. Larry D. SIMONS
- Cited By
- 5 cases
- Status
- Published