Midland Innovations, NV v. Weiland International Inc. et al

Filing 110

ORDER by Judge Claudia Wilken ADOPTING MAGISTRATE JUDGES REPORTS AND RECOMMENDATIONS AND DENYING ( 99 , 100 ) MOTION TO EXPAND RECORD. (ndr, COURT STAFF) (Filed on 11/21/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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MIDLAND INNOVATIONS, NV,

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MC 07-80257 CW

Plaintiff,
v.
WEILAND INTERNATIONAL INC., et
al.,
Defendants.
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ORDER ADOPTING
MAGISTRATE JUDGE’S
REPORTS AND
RECOMMENDATIONS
AND DENYING MOTION
TO EXPAND RECORD
(Docket Nos. 99
and 100)

United States District Court
For the Northern District of California

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The Court has reviewed Magistrate Judge Vadas’s four Reports

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and Recommendations regarding: (1) Enjoining the Levying Officer

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From Releasing Real Property Levied Under a Writ of Execution

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(Docket No. 86); (2) Denying Third Party Claim of Weiping Chen

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(Docket No. 87); (3) Sustaining Objection to Undertaking filed by

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Third Party Weiping Chen (Docket No. 88); and (4) Sale of Dwelling
(Docket No. 89), as well as Third Party Weiping Chen’s objections
thereto and Judgment Creditor Midland Innovations’ opposition to
the objections.

The Court finds the Reports to be correct and

adopts the Recommendations.
BACKGROUND

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This case arises from a default judgment entered in the
Southern District of New York against Judgment Debtor Wen Wang for
patent infringement damages, the amount of which, with accrued
interest, has accumulated to a sum exceeding $1.3 million.

On

November 8, 2007, Judgment Creditor Midland Innovations, NV

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registered the New York judgment in this Court.

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2008, Judgment Creditor recorded an abstract of judgment on a

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On January 14,

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house in Dublin, California, which is recorded as purchased on May

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19, 2005 by Judgment Debtor Wang and Third Party Chen as husband

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and wife.

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with right of survivorship.

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United States District Court
For the Northern District of California

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Title to the property was taken as community property
See Docket No. 53, Ex. B.

In March 2014, this Court issued a renewed abstract of
judgment in the amount of $1.385 million and Judgment Creditor
filed motions for judgment debtor examinations as to Judgment
Debtor Wang and Third Party Chen.

Docket Nos. 8, 9.

On March 31,

2014, the undersigned referred the post-judgment collections
matters to Magistrate Judge Vadas.

Docket No. 10.

On April 22, 2014, at the request of Judgment Creditor, the
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Levying Officer, the United States Marshals Service, levied on the
Dublin property under a Writ of Execution issued on January 13,
2014 to foreclose on Midland’s judgment lien created by the
January 14, 2008 Abstract of Judgment.
On May 13, 2014, the Levying Officer served Judgment Creditor

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with notice that Chen had filed a Third Party Claim pursuant to

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California Code of Civil Procedure section 720.110.

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2014, Judgment Creditor filed an undertaking with the Levying

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Officer pursuant to California Code of Civil Procedure section

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720.160.

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On May 28,

On June 5, 2014, Judgment Creditor filed an Application for

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Order for Sale of Dwelling with respect to the Dublin property.

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Judge Vadas held a hearing on the application on July 17, 2014.

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Judge Vadas took the application under submission to allow Third

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Party Chen and Hongdi Ren1 to retain counsel and file papers in

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opposition to the application.

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On July 21, 2014, Judgment Creditor received notice by mail

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from the Levying Officer that, on June 12, 2014, Third Party Chen

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had filed an undertaking with the Levying Officer pursuant to

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United States District Court
For the Northern District of California

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California Code of Civil Procedure section 720.630.
Between July 22 and August 1, 2014, Judgment Creditor filed
three additional motions: a petition for hearing on Chen’s third
party claim, an ex parte application for an emergency order
enjoining the Levying Officer from releasing the Dublin property,
and a motion objecting to the undertaking filed by Third Party

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Chen.

On July 29, 2014, Judge Vadas granted the ex parte

application and enjoined the release of the Dublin property
pending further order of the court.
In their oppositions to the motions, Third Party Chen and Ren
argued that Third Party Chen was never married to Judgment Debtor

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Wang and that Third Party Chen’s father provided the funds for the

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purchase of the Dublin property.

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as an exhibit to her declaration, a purported May 25, 2005

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agreement between herself and Judgment Debtor Wang, stating that

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(1) Chen paid for the Dublin property in full; (2) the parties

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agreed to take title to the property as husband and wife, but that

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Wang was not entitled to any share of the property until Wang and

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Third Party Chen married; (3) if Wang and Chen married, they would

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jointly own the property from the time of the marriage; (4) if

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they did not marry, Chen would own the property alone and would

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Third Party Chen also offered,

Ren is Judgment Debtor Wang’s mother. As discussed below,
her name is on the most recently recorded title to the Dublin
property.
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have the right to sell or transfer the property; and (5) if they

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married and divorced, Chen would own the property alone from the

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date of the divorce.

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United States District Court
For the Northern District of California

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Third Party Chen and Ren also asserted that, in late 2007,
after it became clear that Judgment Debtor Wang did not intend to
marry Chen, Wang’s mother Ren approached Chen, stating that she
was interested in buying a fifty percent share in the Dublin
property.

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Third Party Chen declared that she estimated that the

property was worth approximately one million dollars, so she
agreed to sell a fifty percent share of the property to Ren for
$500,000.

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Docket No. 30, Ex. 3.

Although Ren was not able to pay the full amount, she

and Third Party Chen agreed that Ren would make installment
payments to Chen’s father.

Ren’s declaration attached a copy of a

check in the amount of $13,300, made out to Third Party Chen,
which Ren and Chen represent was her first payment.

According to

Third Party Chen, as of July 30, 2014, Ren had paid approximately

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$300,000 toward the amount promised.

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shortly after the original abstract of judgment was recorded on

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the house, a Grant Deed was recorded in which Judgment Debtor Wang

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and Third Party Chen transferred their community property right of

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survivorship interests in the Dublin property to Chen and Judgment

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Debtor Wang’s mother Ren as tenants in common.

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indicated that the transfer was a gift and not pursuant to a sale.

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Docket No. 53, Ex. D.

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not pay any transfer taxes.

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On February 19, 2008,

The Grant Deed

Accordingly the parties to the transfer did

In response, Judgment Creditor argued that Third Party Chen

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and Ren’s declarations were not credible because Third Party Chen

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and Judgment Debtor Wang took title to the Dublin property as

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husband and wife and as community property with right of
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survivorship.

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that, as early as 2000, Third Party Chen and Judgment Debtor Wang

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had taken title to real property in New Jersey as “husband and

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wife.”

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recording of the transfer of property from Judgment Debtor Wang

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United States District Court
For the Northern District of California

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Moreover, Judgment Creditor noted that the February 2008

and Third Party Chen to Ren and Chen as a gift was inconsistent
with the claimed payments from Ren to Chen.
On August 22, 2014, Judge Vadas issued the four reports and

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In addition, Judgment Creditor produced evidence

recommendations to which Third Party Chen now objects: (1) a
recommendation that the Court enjoin the Levying Officer from
releasing real property pending additional orders of the Court;

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(2) a recommendation that the Court deny Chen’s third party claim;
(3) a recommendation that the Court sustain Judgment Creditor’s
objection to the undertaking filed by Chen; and (4) a
recommendation that the Court order the sale of the Dublin
property.

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LEGAL STANDARD

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When a party files a timely objection to a magistrate judge’s

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report and recommendation, the district court must “make a de novo

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determination of those portions of the report or specified . . .

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recommendations to which objection is made,” and “may accept,

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reject, or modify, in whole or in part, the findings or

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recommendations made by the magistrate.”

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§ 636(b)(1)(c); see also Fed. R. Civ. P. 72(b)(3).
DISCUSSION

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28 U.S.C.

I.

Motion to Expand the Record and Introduce of New Arguments
Along with her objections to Judge Vadas’s Reports and

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Recommendations, Third Party Chen seeks to expand the record with

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additional evidence and to introduce new arguments regarding
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jurisdiction, abstention and the Eighth Amendment not raised

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before the magistrate judge.

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introduction of new evidence and arguments is improper.

Judgment Creditor argues that the

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A.

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The Ninth Circuit has held that “a district court has

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United States District Court
For the Northern District of California

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discretion, but is not required, to consider evidence presented
for the first time in a party’s objection to a magistrate judge’s
recommendation.”
Cir. 2000).

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United States v. Howell, 231 F.3d 615, 621 (9th

When issuing the reports and recommendations at issue

in this order, Judge Vadas rejected declarations submitted by Chen
and Ren.

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Newly Presented Evidence

Judge Vadas struck the declarations because they failed

to comply with Civil Local Rule 5-1(i)(3).

He also noted that the

declarations “reflect perjury and fraud on their part” and
characterized them as “self-serving and not credible.”
Docket No. 86 at 5.

See, e.g.,

Indeed, referring to the initial recording of

the purchase of the property as community property with right of

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survivorship, counsel for Chen stated, “I will admit that they did

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lie in the grant deed.”

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Hearing Transcript at 26.

Among the bases for Judge Vadas’s concerns about the

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reliability of the declarations were counsel’s acknowledgment of

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Wang and Chen’s dishonesty when originally purchasing the property

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and the evidence of dishonesty created by the recording document

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which indicated that Wang and Chen were giving part of the

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interest in the Dublin property to Ren, contrasted with the claim

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that Ren was expected to and did pay for the interest.

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Chen now seeks to augment the record to present (1) a

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properly signed version of her declaration, including additional

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documents that she asserts support her contention that she and

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Wang were never married; (2) a declaration from her father,
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Zuxiang Chen; and (3) a request for judicial notice attaching

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various documents she contends are necessary to support her new

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arguments regarding jurisdiction and abstention.
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United States District Court
For the Northern District of California

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Chen’s Declaration

The Court declines to augment the record to accept Chen’s new
declaration.

The credibility and authenticity concerns that

existed when most of the information contained in the declaration
was presented to Judge Vadas still exist.

Moreover, the new

exhibits, a certificate of naturalization from September 2003
indicating that Chen was divorced at the time and a 2004 federal
tax return indicating that Chen filed her personal income tax

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return as a head of household and not as married, are not relevant
to whether Wang and Chen were married at the time they took title
to the Dublin property on May 19, 2005.

A person is eligible to

file her federal tax return as head of household if she is
unmarried or “considered unmarried” as of the last day of the tax

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year.

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of Chen’s marital status, it is only relevant as to her status on

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December 31, 2004.

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unmarried” for purposes of head of household status even when they

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are married.

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2.

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Accordingly, to the extent the 2004 tax return is evidence

Moreover, individuals can be “considered

See 26 U.S.C. § 2.
Zuxiang Chen’s declaration

The Court also declines to augment the record to accept the

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declaration of Chen’s father, Zuxiang Chen.

The declaration

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contains discussion of Zuxiang Chen’s intention, when he allegedly

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funded the purchase of the Dublin property, that Judgment Debtor

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Wang only have an interest in the property if he married and

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stayed married to Chen.

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self-serving for the Chen family, and Zuxiang Chen’s intentions

However, this declaration is similarly

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with respect to his gift are not relevant to whether Wang and Chen

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were married at the time they took title to the Dublin property on

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May 19, 2005.
3.

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United States District Court
For the Northern District of California

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Documents Related to Jurisdiction and Abstention

The Court further declines to augment the record to permit
the introduction of evidence to support Chen’s arguments that
(1) the Court lacks subject matter jurisdiction over her and
(2) the Court should dismiss or stay this action under the
doctrine of abstention.

As discussed below, the Court finds that

these arguments fail as a matter of law.

Accordingly, augmenting

the record with these additional documents would not aid in the
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resolution of the present motion.
B.

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New Arguments not Raised before Judge Vadas
1. Jurisdiction

Chen first argues that this Court lacks jurisdiction over her
because she was not a party to the New York action which led to

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the judgment on which Judgment Creditor is trying to collect.

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Accordingly, Chen argues that the Court cannot collect any portion

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of the judgment from her, including the proceeds of a forced sale

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of the Dublin property.

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Chen must demonstrate that she and Wang did not jointly own the

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Dublin property in January 2008, when the abstract of judgment was

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recorded.

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that Wang and Chen were not married at that time lacked

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credibility and was unreliable because it was self-serving.

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Court similarly discounts that evidence.

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jurisdiction argument fails as a matter of law.

However, to succeed on this argument,

As discussed above, Judge Vadas found that all evidence

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Accordingly, Chen’s

The

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Abstention

Chen next argues that the Court should dismiss or stay this

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case based on two pending Alameda County Superior Court cases.

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One case, Midland Innovations, NV v. Wang, Alameda County Superior

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Court Case No. RG 13 706542, was filed on December 12, 2013.

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United States District Court
For the Northern District of California

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In

that case, Midland asserts a claim of intentional fraudulent
transfer based on the 2008 transfer of the Dublin property from
Wang and Chen to Ren and Chen.

The other, Chen v. Wang, et al.,

Alameda County Superior Court Case No. RG 14 739421, was filed on
September 5, 2014.

In that case, Chen asserts a quiet title claim

against Judgment Debtor Wang, Ren and Judgment Creditor.
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Chen first asserts that the Midland v. Wang requires
abstention under Younger v. Harris, 401 U.S. 37 (1971), because
there is an ongoing state judicial proceeding that implicates an
important state interest and provides a full and fair opportunity
to litigate Judgment Creditor’s interest.

However, Judgment

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Creditor’s Alameda County action does not involve an important

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state interest, and Chen provides no authority to support a

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finding that it does.

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Younger abstention argument fails as a matter of law.

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extent Chen asserts that her Alameda County action requires

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abstention under Younger, it was not an “ongoing state judicial

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proceeding” because it was not filed until after Judge Vadas

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entered the orders currently at issue.

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Accordingly, the Court finds that Chen’s
To the

Chen next asserts that abstention is required under Burford

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v. Sun Oil Co., 319 U.S. 315 (1943).

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Burford abstention is justified when “(1) the state has

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concentrated suits involving the local issue in a particular

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court; (2) the federal issues are not easily separable from
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In the Ninth Circuit,

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complicated state law issues with which the state courts may have

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special competence; and (3) federal review might disrupt state

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efforts to establish a coherent policy.”

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Inc., 379 F.3d 654, 671 (9th Cir. 2004) (internal quotation marks

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omitted).

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United States District Court
For the Northern District of California

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Poulos v. Caesars World,

Burford abstention is improper where state law provides

for judicial review in any state court of general jurisdiction
rather than concentrating review in a specialized court.

See

Kirkbride v. Continental Casualty Co., 933 F.2d 729, 734 (9th Cir.
1991) (“[T]he fact that California has not established a
specialized court system to resolve disputes over insurance policy
coverage convinces us that application of the Burford doctrine to

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this case is unwarranted.”).

Here, the only state law issue is

whether Wang and Chen owned the Dublin property as community
property.

Chen provides no evidence that there is a specialized

court system to resolve disputes over such issues.

Accordingly,

Burford abstention is not warranted.

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Chen also argues that abstention is required under Colorado

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River Water Conservation District v. United States, 424 U.S. 800

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(1976).

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obligation” to exercise the jurisdiction conferred upon them.

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at 817.

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abstention is not based on weighty considerations of federal-state

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relations.

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promote ‘wise judicial administration.’ As a result, Colorado

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River abstention should only be used in ‘exceptional’

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circumstances.”

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Co., 843 F.2d 1253 (9th Cir. 1988) (quoting Colorado River, 424

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U.S. at 817-18).

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Moreover, “wise judicial administration” calls for this Court to

Generally, federal courts have a “virtually unflagging
Id.

“Unlike . . . other forms of abstention, Colorado River

Rather, Colorado River abstention is designed to

American Int’l Underwriters, Inc. v. Cont’l Ins.

No such circumstances exist in this case.

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rule on the issues that have already been briefed and adjudicated

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before Judge Vadas in this case.

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arguments fail as a matter of law.

Accordingly Chen’s abstention

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C.

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Finally, Chen argues that the Southern District of New York

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United States District Court
For the Northern District of California

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Eighth Amendment Claim

judgment is not enforceable against her because it constitutes an
excessive fine in violation of the Eighth Amendment.

However,

Judgment Creditor does not seek to enforce the judgment against
Chen.

Rather, it seeks to enforce the judgment against Judgment

Debtor Wang.

Accordingly, Chen’s Eighth Amendment claim fails as

a matter of law.
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II.

Orders Issued by Judge Vadas
Chen’s only arguments in support of her objections to Judge

Vadas’s reports and recommendations rely on her assertions that
(1) she was not married to Wang at the time that they took title
to the Dublin property in 2005; and either (a) she and Wang

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entered into an agreement at the time they took title that

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overrides the fact that they took title as husband and wife; or

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(b) the 2008 deed of trust granting the property to Ren and Chen

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precludes Judgment Creditor from obtaining the relief it seeks.

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As discussed above, the Court does not credit Chen’s evidence that

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she and Wang were not married at the time they took title to the

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Dublin property in 2005.

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Chen’s evidence that she entered into an agreement with Judgment

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Debtor in 2005 that effectively overrides the fact that they took

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title as husband and wife.

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Procedure section 697.390 provides that, if an interest in real

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property that is subject to a judgment lien is transferred or

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encumbered without satisfying or extinguishing the judgment lien,

Moreover, the Court does not credit

Finally, California Code of Civil

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the interest transferred or encumbered remains subject to the

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lien.

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lien on the property.

Accordingly, the 2008 deed of trust cannot extinguish the

CONCLUSION

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United States District Court
For the Northern District of California

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For the foregoing reasons the Court finds the Reports correct
and adopts the Recommendations.

Accordingly, the Court orders as

follows:
(1)

The United States Marshals Service, Northern District of

California (the Levying Officer) is hereby enjoined, until further
notice of this Court, from releasing, disposing, assigning, or
otherwise transferring the real property commonly known as 2956 W.

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Castle Pines Terrace, Dublin, CA 94568 notwithstanding: (a) any
other order issued by this Court to date; or (b) the provisions of
Title 9 (Enforcements of Judgments Law) of Part 2 of the
California Code of Civil Procedure; and/or (c) that Third Party
Chen may file an undertaking pursuant to the concurrently issued
Order Sustaining Objection to Undertaking.
(2)

The $10,000.00 undertaking filed by Third Party Chen on

June 12, 2014 is determined to be insufficient.

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On or before ten days from the date of this order, Third

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Party Chen shall file a new undertaking in an amount sufficient to

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bring the total undertaking to the sum of $1,035,000.

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Notwithstanding anything to the contrary herein and/or the

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provisions of Title 9 (Enforcements of Judgments Law) of Part 2 of

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the California Code of Civil Procedure, the order enjoining the

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Levying Officer from releasing real property shall supersede the

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terms of this order and the real property commonly known as 2956

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W. Castle Pines Terrace, Dublin, CA 94568 shall not be released

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from the levy upon the filing of the undertaking by Third Party

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Chen as ordered herein.

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(3)

At the time Judgment Creditor Midland Innovations, NV

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created a judgment lien on real property by recording an Abstract

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of Judgment on January 14, 2008, the title to the real property

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United States District Court
For the Northern District of California

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commonly known as 2956 W. Castle Pines Terrace, Dublin, CA 94568
held as “Wen Wang and Weiping Chen, Husband and Wife as Community
Property with Right of Survivorship,” reflected the actual
ownership of and interests in the property.

Judgment Creditor’s

lien attached to said interests and its lien is superior to any
other interest acquired thereafter by Third Party Chen.

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Accordingly, the Third Party Claim of Weiping Chen, with respect
to the real property commonly known as 2956 W. Castle Pines
Terrace, Dublin, CA 94568, is denied.
(4)

The real property dwelling commonly known as 2956 W.

Castle Pines Terrace, Dublin, CA 94568, and legally described as

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LOT 16 OF TRACT MAP 7137 FILED FEBRUARY 26, 2004, IN BOOK 275 OF

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MAPS, PAGES 9 THROUGH 12, INCLUSIVE, OFFICIAL RECORDS OF ALAMEDA

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COUNTY, AS FURTHER DESCRIBED ASSESSOR’S PARCEL NUMBER: 985-0050-

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018, is not an exempt homestead.

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authorized and is directed to sell this property.

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Subject Property shall be governed by California Code of Civil

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Procedure section 701.510 et seq. and shall not be subject to he

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provisions of Article 4 (commencing with California Code of Civil

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Procedure section 704.710) of Chapter 4.

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The Levying Officer is hereby
The sale of the

Upon sale of the property, the Levying Officer shall deposit

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the proceeds from the sale in the registry of the Court.

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Clerk is directed to make the following distributions in the

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following priority to the extent funds are available: (1) the
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The

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Levying Officer’s unadvanced costs; (2) Judgment Creditor’s costs

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and interest accruing after issuance of the writ of execution for

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sale as claimed by Judgment Creditor; and (3) the amount due on

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the judgment with costs and interest.

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IT IS SO ORDERED

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Dated: November 21, 2014

CLAUDIA WILKEN
United States District Judge

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United States District Court
For the Northern District of California

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