Court Opinion

ID: 9701046
Source: CourtListenerOpinion
Date Created: 2023-08-25 22:00:06.201953+00
Date Added: 2024-06-11T18:21:17.572294
License: Public Domain

ELLIOTT, Bankruptcy Judge,
dissenting:
I concur on the issue of dischargeability of the tax claims, but I dissent and would remand for trial on the issue of discharge-ability for fraud.
Since it is not the function of the trial court to adjudicate genuine factual issues at the hearing on the motion for summary judgment, in ruling on the motion all inferences of fact from the proofs prof-erred at the hearing must be drawn in favor of the party opposing the motion.
6 Moore’s Federal Practice (2nd Ed.) 56-469.
Drawing inferences of fact in favor of the party opposing the motion, it seems obvious to me that the Lamberts would not have purchased the property encumbered by an, undisclosed $60,000 tax lien.
California Civil Code § 1572 provides, in part:
Actual fraud, within the meaning of this Chapter, consists in any of the following acts committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract:
3. The suppression of that which is true, by one having knowledge or belief of the fact;
I would hold that there is a triable issue of fact as to whether the Kisiches suppressed the fact that the property was subject to tax liens to induce the Lamberts to purchase the real property. See In re Haddad, 21 B.R. 421, 6 C.B.C.2d 1145, 9 B.C.D. 371 (Bkrtcy.App.9th Cir.1972), affirmed March 2, 1983 by unpublished memorandum, C.A.9th -F.2d -, No. 82-4412, in which we held that failure to disclose a material fact gave rise to a non-dischargea-ble debt under 11 U.S.C. § 523.
I also note that the defendants’ counterclaim alleges that the Kisiches conveyed the property to the Lamberts by grant deed, an allegation not directly controverted by the Kisiches’ response that they admitted “conveying” the property.
California Civil Code § 1113 provides that a grant deed includes a covenant that the estate conveyed is free from encumbrances made or suffered by the grantor (emphasis added).
Therefore, the nature of the conveyance in this proceeding as well as the consequences of a breach of the covenant (if one exists) should also be addressed by the trial court.
Appellant Santa Clara County Title Company (SCCTC) acted as escrow agent in the sale from Kisich to Lambert. SCCTC also acted as agent for appellant U.S. Life Title Insurance Company of Dallas in arranging for title insurance. Mrs. Kisich’s declaration claims that she informed the escrow officer of the existence of the tax liens and even sent SCCTC a copy of an old title report showing the liens.
A Vice President of SCCTC declared under oath that it was the practice of the company to record any and all important communications, that he had carefully reviewed the files of the Kisich-Lambert sale, and that he found no record of any communication from Mrs. Kisich related to tax liens. This declaration is admissible under Rule 803(7) and, at least for the purposes of *405summary judgment, raises a' triable issue of fact.
The suggestion that the Lamberts or SCCTC could have discovered the tax liens in searching the record affords no defense to Kisich.
The fact that an investigation would have revealed the falsity of the misrepresentation will not alone bar his recovery (Rest. Torts, sec. 540; see cases cited in 12 Cal. Jur. 758, 759), and it is well established that he is not held to constructive notice of a public record which would reveal the true facts. (Rest. .Torts, sec. 540(b); see cases cited in 12 Cal.Jur. 759, 764; Pros-ser, Torts 750, 751). The purpose of the recording acts is to afford protection not to those who make fraudulent misrepresentations but to bona, fide purchasers for value.
Seeger v. Odell, 18 Cal.2d 409, 414, 115 P.2d 977.
The appellant title company succeeds to the rights of the Lamberts by subrogation (having paid the tax lien) and by assignment from the Lamberts.
The majority’s view that § 523(a)(2) was never intended to be used by errant insurers to shift the risk of loss to the debtor is unsupported by authority or reason. I submit that the better view is that an assignee, voluntary or by operation of law, has standing to assert a claim for relief for nondis-chargeability except where Congress has denied that relief to assignees, as Congress has done in the case of alimony and child support, 11 U.S.C. § 523(a)(5)(A).
See Firemen’s Fund Insurance Company v. Covino, Bkrtcy.M.D.Fla. (1981) 12 B.R. 876 (plaintiff-surety paid debtor’s employer the amount embezzled by the debtor and was granted a non-dischargeable judgment). In that case, the court quotes with approval from Hartford Accident & Indemnity Co. v. Flanagan, (S.D.Ohio 1939) 28 F.Supp. 415 as follows:
the act should be liberally construed so as to prevent the discharge in bankruptcy of a liability which would not exist but for the fraudulent conduct of the bankrupt .... If there has been no embezzlement or misappropriation there would have been no loss to the surety and no occasion for indemnity.