2016-00196902-CU-MC

Khalid N. Khan vs. US Bank, N.A.

Nature of Proceeding: Hearing on Demurrer to Second Amended Complaint

Filed By: Balch, Noah R.

The demurrer of Defendants U.S. Bank, N.A. (U.S. Bank) and SA Challenger, Inc.

(collectively “Defendants”) is SUSTAINED without leave to amend.

Defendants’ request for judicial notice is GRANTED.

Plaintiff Khalid Khan’s (Khan) late-filed, late served declaration executed on 2/20/18 is STRICKEN. The court previously continued the matter so that it could consider Khan’s late-file opposition.

This is a nonjudicial foreclosure case. According to Khan, Defendants wrongfully foreclosed on a property of his located at 611 16th Street in Sacramento, California (the “Property”). Khan initially attempted to prosecute his causes of action in federal court, but the action was dismissed on grounds he lacked standing. (See RJN, Exhs. 2, 5 and 6.) This state-court action followed.

Defendants demurred to the first amended complaint (FAC), and Khan failed to oppose. Among Defendants’ arguments on demurrer was that Khan lacked standing. (See RJN, Exh. 9.) The court agreed and determined that Khan’s causes of action existed while his 2013 bankruptcy case was active, that the causes of action were assets of the bankruptcy estate and, therefore, that the causes of action were for the bankruptcy trustee to prosecute or abandon in the first instance. (See id.; see also cases cited in Defendants’ Moving Memo. at 3:3-12.) The court granted Kahn leave to amend. In so doing, it indicated the bankruptcy trustee would either have to substitute into the case as the plaintiff or abandon the causes of action so that Khan could prosecute them himself.

According to Defendants, Khan did not move to re-open the bankruptcy cases but filed the instant second amended complaint (SAC) anyway. The bankruptcy court’s docket indicates Khan did not move to reopen his bankruptcy case. (See RJN, Exh. 10.) Defendants thus demur on grounds Khan still lacks standing and is not a proper party.

In his opposition, Khan asserts that he verbally informed the trustee of his causes of action while the bankruptcy case was active. Regardless, the docket discloses that Khan’s causes of action based on the Property were neither administered nor abandoned. In fact, the federal court dismissed Khan’s action for that reason. (RJN, Exh. 5.) Khan’s assertion of a verbal exchange with the trustee does not confer standing to prosecute causes of action belonging to the bankruptcy estate.

Next, Khan points out that U.S. Bank moved to lift the automatic bankruptcy stay so that it could foreclose on the Property while the bankruptcy was pending. Khan suggests that this act by U.S. Bank somehow undermines its current position that

Khan’s causes of action belong to the bankruptcy estate. Defendants counter that the lifting of the stay has no bearing on Khan’s standing now, and, absent an explanation from Khan, the court agrees.

Finally, Khan asserts that his counsel recently telephoned the bankruptcy trustee but received no response. The suggestion is that the trustee’s asserted failure to respond effectuated the trustee’s abandonment of the causes of action. But as Defendants observe, the trustee must formally abandon estate assets after notice and hearing. (See Reply at 2:3-7.)

The allegations and judicially noticeable materials compel a conclusion that Khan lacks standing. Although Khan asks for leave to amend, he does not assert he will move to re-open the bankruptcy case. Nor does he explain why he failed to do so after the last demurrer was sustained. Under the circumstances, leave to amend should be denied.

Disposition

The demurrer is sustained without leave to amend.

The minute order is effective immediately. No formal order pursuant is required.

Defendants are directed to lodge a judgment of dismissal for the court’s signature.