First Am. Properties and Acquisitions v. Shante CA2/1

Filed 7/26/23 First Am. Properties and Acquisitions v. Shante CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 ONE
FIRST AMERICAN PROPERTIES B313054
AND ACQUISITIONS, INC.,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. 19STCV02723)
v.
JATINDER K. SHANTE,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, David Sotelo, Judge. Affirmed.
Law Office of Richard L. Antognini and Richard L.
Antognini for Plaintiff and Appellant.
Law Offices of Lloyd S. Mann and Lloyd S. Mann for
Defendant and Respondent.
______________________
This appeal presents the question of whether a wage
garnishment renews the six-year statute of limitations applicable
to contract claims brought by a federal agency. (See 28 U.S.C.
§ 2415(a) (section 2415(a)).) Defendant and respondent Jatinder
K. Shante guaranteed a Small Business Administration (SBA)
loan on behalf of a business she partially owned, defendant
Fornia Hospitality Group, LLC (Fornia). When Fornia defaulted,
the SBA demanded Shante pay the full amount. When she did
not tender such payment, the SBA began garnishing her wages.
Plaintiff and appellant First American Properties and
Acquisitions, Inc. (First American) thereafter purchased the
defaulted loan from the SBA and became the SBA’s assignee.
After First American filed a collection suit against Fornia,
Shante, and other guarantors, the trial court granted summary
judgment in favor of Shante on the ground that First American’s
claim was barred by the statute of limitations. First American
contends the trial court erred, arguing that garnishments of
Shante’s wages were “partial payment[s]” that caused First
American’s “right of action [to] be deemed to accrue again at the
time of each such [partial] payment.” (§ 2415(a).) First American
argues in the alternative that the promissory note and guarantee
Shante signed waived the statute of limitations. For the reasons
explained below, we reject these arguments and affirm.
FACTS AND PRIOR PROCEEDINGS
The basic facts of this case are undisputed. Nevertheless,
because this is an appeal from summary judgment, we interpret
the facts “in a light favorable to . . . the losing party” (Saelzler v.
Advanced Group 400 (2001) 25 Cal.4th 763, 768), here First
American.
2
In February 2006, Shante and her husband, defendant
Bhupinder S. Shante, along with two other individuals,
defendants Satwant C. Chehal and Harban S. Chehal,1 formed
Fornia for the purpose of buying a hotel or motel. The Shantes
and Chehals owned 50 percent each of Fornia. Soon afterward,
Fornia purchased a Ramada Inn in Merced for approximately
$7.2 million. To help pay for the hotel, Fornia obtained a bank
loan for $4,451,000, as well as an additional loan through an SBA
program for $1,347,000. The deed of trust that secured the SBA
loan was subordinate to the deed of trust securing the bank loan.
Each of the four members of Fornia signed a personal
“guarantee” of the SBA loan.
The hotel property did not perform as well as expected, and
by late 2008, Fornia had stopped making regular payments on
the loans. The bank foreclosed on the hotel, which was sold at a
trustee’s sale in January 2010 for an amount that did not cover
the full balance of the bank loan, let alone the SBA loan.
Between 2010 and 2012, Shante received several notifications
that the SBA loan was in default. In a letter dated February 21,
2012, the SBA wrote to Shante that she was personally
responsible as guarantor for the loan, and that the full balance of
$1,506,459.13 was due as of the date of the letter. In March and
July 2012, Shante received notices of wage garnishment orders,
and from 2012 to 2017, the federal government garnished her
wages.
1 The other defendants in this case are not parties to this
appeal. First American settled its claims against the Chehals
and dismissed Fornia without prejudice. The record does not
reveal the status of First American’s case against Shante’s
husband Bhupinder Shante.
3
On February 22, 2018, six years and one day after the SBA
demanded payment from Shante of the full balance of the loan,
the SBA assigned the loan to First American. In December 2018,
First American notified Shante and the other Fornia members
that the full amount of the debt was due immediately. According
to First American, the debtors owed $1,151,489.96 in principal
and $310,866.97 in interest as of the date of the assignment.
On January 25, 2019, First American filed a complaint
against Fornia, Shante, and the other three guarantors of the
SBA loan alleging causes of action for breach of written contract
and promissory note, breach of guarantee, breach of a security
agreement, unjust enrichment, money had and received, and
account stated.
Shante moved for summary judgment alleging that because
First American had failed to file suit within the six-year statute
of limitations specified under section 2415(a), First American’s
claims were time-barred. The trial court agreed and granted
summary judgment in favor of Shante.
DISCUSSION
A. Federal Law Supplies the Statute of Limitations for
First American’s Claim
Both sides agree, and we concur, that because First
American is an assignee of a claim that previously belonged to
the federal government, section 2415(a) supplies the applicable
statute of limitations rather than any state statute. This is
pursuant to the so-called Summerlin2 rule, which provides that
2 United States v. Summerlin (1940) 310 U.S. 414 [60 S.Ct.
1019, 84 L.Ed. 1283] (Summerlin).
4
“the United States is not bound by state statutes of limitation or
subject to the defense of laches in enforcing its rights.
[Citations.] The same rule applies whether the United States
brings its suit in its own courts or in a state court.” (Summerlin,
supra, 310 U.S. at p. 416; accord, U.S. v. Thornburg (9th Cir.
1996) 82 F.3d 886, 893 [“as a sovereign, the United States is
subject to a limitations period only when Congress has expressly
created one”].) The Supreme Court explained in Summerlin that
“When the United States becomes entitled to a claim, acting in its
governmental capacity, and asserts its claim in that right, it
cannot be deemed to have abdicated its governmental authority
so as to become subject to a state statute putting a time limit
upon enforcement.” (Summerlin, supra, at p. 417.)
The exemption from state statutes of limitation remains in
effect even if the federal government assigns its claim, under the
principle that “an assignee generally ‘stands in the shoes of the
assignor.’ ” (White v. Moriarty (1993) 15 Cal.App.4th 1290, 1298,
quoting Mountain States Financial Resources v. Agrawal
(W.D.Okla. 1991) 777 F.Supp. 1550, 1552.) Public policy also
counsels in favor of granting assignees freedom from state
statutes of limitations, in that this “improves the marketability of
instruments held by the United States, thereby giving the United
States greater flexibility in monetizing its claims.” (UMLIC VP
LLC v. Matthias (3d Cir. 2004) 364 F.3d 125, 133.)
The Summerlin rule is subject to limitations, one of which
is that it applies only “when ‘the government was proceeding in
its sovereign capacity.’ ” (Bresson v. C.I.R. (9th Cir. 2000) 213
F.3d 1173, 1177, quoting United States v. California (1993) 507
U.S. 746, 757 [113 S.Ct. 1784, 123 L.Ed.2d 528].) The issuance
and collection of SBA loans fit within this restriction. (See U.S.
5
v. Thornburg, supra, 82 F.3d at p. 894.) The court in U.S. v.
Peoples Household Furnishings, Inc. (6th Cir. 1996) 75 F.3d 252noted that Summerlin itself involved an effort to collect on a loan
assigned to the United States under the National Housing Act,
and reasoned that the statute under which the SBA operates
“was designed to enhance the security and economic well-being of
the nation [citation], and its purposes are surely no less
‘governmental’ in character than those of the National Housing
Act.” (Peoples Household Furnishings, Inc., supra, at pp. 255-
256.)
Given that federal law supplies the governing statute of
limitations, “[section] 2415(a) applies to actions brought by the
SBA to enforce guarantees on defaulted loans.” (U.S. on Behalf of
Small Bus. Admin. v. Richardson (3d Cir. 1989) 889 F.2d 37, 39
(Richardson).) The statute states that, subject to exceptions not
relevant here, “every action for money damages brought by the
United States or an officer or agency thereof which is founded
upon any contract express or implied in law or fact, shall be
barred unless the complaint is filed within six years after the
right of action accrues . . . : Provided, That in the event of later
partial payment or written acknowledgment of debt, the right of
action shall be deemed to accrue again at the time of each such
payment or acknowledgment.” (§ 2415(a).) Because First
American is seeking money damages on the basis of a contract
claim that was assigned to it by the federal government, its claim
is subject to section 2415(a).
6
B. The Garnishment of Shante’s Wages Did Not
Constitute a “Partial Payment” for Purposes of
Renewing the Statute of Limitations
“The general rule is that a cause of action upon a guarantee
of a note accrues not upon a mere default in payment, but only
when the creditor notifies the guarantor that the entire debt has
been accelerated and demands payment of the entire balance.
[Citations.]” (U.S. v. Lorince (N.D.Ill. 1991) 773 F.Supp. 1082,
1085 (Lorince).) In this case, the cause of action accrued no later
than February 21, 2012, when the SBA demanded payment of the
full balance of the loan from Shante. First American
acknowledges that more than six years elapsed from this point
until it filed suit against Shante in January 2019.
First American contends its suit was nevertheless timely,
arguing that the garnishment of Shante’s wages between 2012
and 2017 constituted “partial payment[s]” that caused “the right
of action . . . to accrue again.” (§ 2415(a).)3 Under First
American’s interpretation, no more than two years elapsed from
the final partial payment until First American filed suit. Shante
disagrees, contending that the amounts the government received
via wage garnishment were not partial payments, as that term is
used in section 2415(a), because they were not voluntary. We
review this statutory interpretation question de novo. (Aryeh v.
Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.)
3 In its opposition to Shante’s motion for summary
judgment, First American also argued that the garnishment
proceedings equitably tolled the statute of limitations. First
American does not renew that argument in its appellate briefing,
and we do not address it.
7
In support of its position, First American relies almost
entirely on the text of the statute itself, which it argues is
unambiguous. First American contends that if Congress had
meant for only voluntary partial payments to restart the statute
of limitations, it would have used the word “voluntary” in section
2415(a). The lack of such a modifier, according to First
American, is decisive.
First American is correct that a “statute’s plain meaning
controls the court’s interpretation unless its words are
ambiguous. If the plain language of a statute is unambiguous, no
court need, or should, go beyond that pure expression of
legislative intent.” (Green v. State of California (2007) 42 Cal.4th
254, 260.) We do not agree, however, that the meaning of
“payment” in section 2415(a) is unambiguous. First American’s
argument as to the lack of the word “voluntary” to modify “partial
payment” can be just as easily turned around: If Congress had
meant to enact First American’s interpretation of the statute, it
could have written “partial payment, whether voluntary or
involuntary.” The lack of a clarification in either direction leaves
section 2415(a) “susceptible to more than one interpretation.”
(Holland v. Assessment Appeals Bd. No. 1 (2014) 58 Cal.4th 482,
490.) In addressing this ambiguity, “we ‘may consider various
extrinsic aids, including the purpose of the statute, the evils to be
remedied, the legislative history, public policy, and the statutory
scheme encompassing the statute. [Citation.]’ [Citation.]” (Ibid.)
The court in Lorince examined the legislative history of
section 2415(a) and concluded it “reflects a congressional intent
to codify the common law [rule] that ‘[t]he obligation of a debt
will continue where a debtor has acknowledged the debt and
indicated his willingness to discharge the obligation.’ [Citations.]
8
This principle rests in turn upon the premise that when a debtor
has unequivocally acknowledged a preexisting debt and
demonstrated an intention to honor it, she has effectively made a
new promise to pay the debt and thereby triggered a new
limitations period. [Citation.]” (Lorince, supra, 773 F.Supp. at
p. 1087.) In light of this history, the Lorince court concluded that
to renew the statute of limitations under section 2415(a), “the
circumstances of the payment must reflect the intent of the
debtor to honor the debt.” (Ibid.) In other words, “only if the
[debtor has] voluntarily consented to the partial payment does
that payment revive the statute of limitations as to them.” (Id. at
p. 1093.)
Two additional considerations counsel in favor of the
Lorince court’s interpretation. First, section 2415(a) allows not
only for a partial payment, but also for a “written
acknowledgment of debt,” to restart the statute of limitations.
First American concedes that a “written acknowledgment is
necessarily voluntary,” but argues that we should not infer that
Congress intended a similar voluntariness requirement for
partial payments. This is contrary to the canon of statutory
construction known as ejusdem generis, which provides that
“ ‘ “ ‘when a statute contains a list or catalogue of items, a court
should determine the meaning of each by reference to the others,
giving preference to an interpretation that uniformly treats items
similar in nature and scope.’ ” ’ [Citations.]” (In re Corrine W.
(2009) 45 Cal.4th 522, 531.) Because a written acknowledgment
must be voluntary, we infer that Congress intended to impose the
same requirement on partial payments.
Second, courts have interpreted the analogous California
law, Code of Civil Procedure section 360, the same way. In
9
Martindell v. Bodrero (1967) 256 Cal.App.2d 56, the court stated
that, “As a general rule, part payment of a debt or obligation is
sufficient to extend the bar of the statute. The theory on which
this is based is that the payment is an acknowledgment of the
existence of the indebtedness which raises an implied promise to
continue the obligation and to pay the balance.” (Id. at p. 59.) If
the debtor does not make the payment voluntarily, there is no
such implied promise. (See id. at pp. 59-60.) In other words, “the
mere entry of a credit by the creditor without the consent of the
debtor is without effect upon the statute of limitations.” (Bullock
v. Simon (1955) 132 Cal.App.2d Supp. 881, 882.) Of course, these
cases interpreted California law, not section 2415(a), but they
show the court in Lorince accurately interpreted the background
common law principles from which Congress drew when enacting
section 2415(a). (Lorince, supra, 773 F.Supp. at p. 1087.)
In support of its position, First American cites United
States v. Quinones (D.P.R. 1983) 36 B.R. 77 (Quinones). In that
case, the defendants and a third party defaulted on a bank loan
they had jointly obtained. The third party filed for bankruptcy,
at which point the note was assigned to the SBA, which received
a distribution from the bankruptcy court. (Id. at p. 78.) The
district court held that because this distribution reduced the
amount the defendants owed, it constituted a partial payment
that renewed the statute of limitations under section 2415(a).
The suit the government subsequently filed against the
defendants was thus timely. (Quinones, supra, at p. 79.)
But the court in Quinones did not explicitly consider the
question of whether a payment must be voluntary, nor did it
examine the legislative history of the statute detailed in Lorince.
10
It simply asserted4 that the defendants, by acknowledging that
the distribution from the bankruptcy court reduced the
remaining balance on their debt, “acknowledged the existence of
their debt and . . . impliedly promised to pay the balance.”
(Quinones, supra, 36 B.R. at p. 79.) We join the court in Lorince,
supra, 773 F.Supp. at page 1092 in finding Quinones
unpersuasive.
Finally, First American argues that we should construe the
garnishment as a partial payment because Shante is legally
presumed to be aware of the federal garnishment statute (31
U.S.C. § 3720D), “consented to garnishment by borrowing from
the federal government,” and consented further by failing to
contest the garnishment order. We disagree. Even if we assume
Shante consented to potential garnishment of her wages, she
gave that consent at the time she agreed to guarantee the loan,
not at the time of garnishment. Her subsequent “passive
acquiescence in the [garnishment] constituted neither a
voluntary payment as of that date, nor a new promise in writing
to pay the balance of the debt.” (Wolford v. Cook (1898) 71 Minn.
77, 79 [73 N.W. 706, 707]; accord, Lorince, supra, 773 F.Supp. at
4 The Quinones court cited United States v. Glens Falls Ins.
Co. (N.D.N.Y. 1982) 546 F.Supp. 643 in support of its position
(see Quinones, supra, 36 B.R. at p. 79), but the court’s reasoning
in Glens Falls is more in line with Lorince. The court in Glens
Falls stated that “whether part payment takes a case out of the
statute of limitations depends on the intention of the debtor,” and
that “it is the intent of the debtor when he made the payment,
not the intention of the creditor when he received the payment,
that is the crucial inquiry here.” (Glens Falls, supra, at pp. 645-
646.)
11
p. 1091.) Indeed, as far as we can see, she “had no reason to
object, and, if [she] had done so, it would have been futile.”
(Wolford, supra, at p. 79.)
Because the garnishment of Shante’s wages did not reflect
a voluntary decision by Shante at the time of the garnishment, it
did not constitute a partial payment under section 2415(a).5 The
trial court did not err by finding First American’s claims time-
barred.
C. First American Forfeited Its Claim that Shante
Waived the Statute of Limitations
First American argues for the first time in this appeal that
Shante waived the statute of limitations when she signed the
guarantee and the security agreement of the SBA loan, and that
the trial court therefore erred by granting summary judgment.
We reject this claim as forfeited because First American failed to
argue it before the trial court.
“ ‘ “[I]t is fundamental that a reviewing court will
ordinarily not consider claims made for the first time on appeal
which could have been but were not presented to the trial
court.” . . . Such arguments raised for the first time on appeal are
generally deemed forfeited.’ [Citation.]” (Truck Ins. Exchange v.
AMCO Ins. Co. (2020) 56 Cal.App.5th 619, 635.) First American
nevertheless urges us to consider its argument on waiver of the
statute of limitations, arguing that it is “an issue of law that an
5 We need not and do not address Shante’s additional
argument that the payments did not come from Shante herself,
but rather from her employer, and that this fact also disqualified
the garnishment payments from being partial payments under
section 2415(a) that renewed the statute of limitations.
12
appellate court may address even for the first time on our
review.” (Securitas Security Services USA, Inc. v. Superior Court
(2015) 234 Cal.App.4th 1109, 1125.)
Although we have discretion to consider pure questions of
law raised for the first time on appeal, we are not required to do
so. (Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 567;
Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257, 1275-
1276, fn. 3.) To do so would be inappropriate here, where Shante
had no opportunity to argue the issue before the trial court (see
Wittenberg, supra, at p. 567), particularly because it is not at all
clear that the issue “involves only a legal question determinable
from facts that are (1) uncontroverted in the record and (2) could
not have been altered by the presentation of additional evidence.”
(Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228, 1237-
1238.)
Our forfeiture decision might be different if the guarantee
contained language unambiguously and explicitly waiving the
statute of limitations, but the guarantee does not. First
American argues that we may infer a waiver of the statute of
limitations by combining three different provisions of the
contracts Shante signed. First, the guarantee states that it
“remains in effect until the [n]ote is paid in full.” Next, in a
section labeled “general provisions,” under a subheading labeled
“lender’s rights cumulative, not waived” (capitalization omitted),
the guarantee states, “[l]ender may delay or forgo enforcing any
of its rights without losing or impairing any of them.” Finally, in
a separate security agreement that Shante signed on behalf of
Fornia, a provision states that “[f]ailure or repeated failure to
enforce any rights hereunder shall not constitute an estoppel or
13
waiver of [the lender’s] rights to exercise such rights accruing
prior or subsequent thereto.”
“ ‘ “[W]e will not infer from a general contractual provision
that the parties intended to waive a statutorily protected right
unless the undertaking is ‘explicitly stated’ ” ’ ” (Vasquez v.
Superior Court (2000) 80 Cal.App.4th 430, 434), and we are
skeptical that a waiver of an important protection may be pieced
together from these disparate elements, none of which refers
explicitly to the specific right to be waived. That is particularly
true when the guarantee Shante signed did include explicit
waivers of other rights. The guarantee included four waivers of
rights, seven waivers of notice, and 16 waivers of defenses, none
of which had anything to do with a statute of limitations. In a
similar situation, the court in Richardson, supra, 889 F.2d 37rejected an argument for a waiver of the statute of limitations
under section 2415(a) on the basis of a clause allowing the lender
to enter a confession of judgment “at any time.” (Richardson,
supra, at p. 38.) The court reasoned that “the operative phrase in
this section, ‘at any time,’ lacks sufficient specificity to put the
reader on notice of its consequences at the inception of the
transactions. Not only does this phrase remain undefined, the
paragraph fails to make any mention whatsoever of the term
‘statute of limitations.’ ” (Id. at p. 40.) The court in Richardson
also noted that the lack of clarity regarding the waiver of the
statute of limitations stood “in stark contrast to the clarity of
other waivers, not at issue here, that are contained in the same
paragraph.” (Ibid.)
At a minimum, due process entitled Shante to an
opportunity to argue before the trial court that the documents
were ambiguous, and to seek to introduce extrinsic evidence
14
regarding the interpretation of the contract. (See Esparza v. KS
Industries, L.P., supra, 13 Cal.App.5th at p. 1238 [declining to
review forfeited argument where additional evidence might have
altered the outcome]; accord, Meridian Financial Services, Inc. v.
Phan (2021) 67 Cal.App.5th 657, 699-700.) Shante had no such
opportunity here, and we will therefore not consider First
American’s statute of limitations waiver argument for the first
time on appeal.
DISPOSITION
The judgment of the trial court is affirmed. Shante is
awarded her costs on appeal.
NOT TO BE PUBLISHED
WEINGART, J.
We concur:
ROTHSCHILD, P. J.
CHANEY, J.
15