Pajaro Dunes Rental Agency, Inc. v. Spitters (In re Pajaro Dunes Rental Agency, Inc.)

DECISION

This matter came before the Court on the motion by creditor and defendant Laurence L. Spitters, Trustee, and Laurence L. Spitters, individually (“Spitters”), to dismiss the Fifth Claim For Relief in this adversary proceeding brought by the debt- or, Pajaro Dunes Rental Agency (“PDRA”). PDRA’s Fifth Claim For Relief seeks to have Spitters’ deed of trust on PDRA’s real property declared void. PDRA opposed Spitters’ motion, and filed a counter motion for summary judgment.

The Court held a hearing on April 16, 1992.

For the reasons set forth herein, the Court grants PDRA’s motion and denies Spitters’ motion.

I. Factual Background

The following facts are undisputed. PDRA is a California corporation. Hare, Brewer & Kelley, Inc. (“HBK”) is a California corporation and PDRA’s majority shareholder, owning 87.5% of PDRA’s stock. William Kelley and Ryland Kelley (“the Kelleys”) are the sole shareholders of HBK. Ryland Kelley is the sole member of the Board of Directors of PDRA and the President of PDRA.

On May 1, 1989, PDRA and HBK executed a $1 million note in favor of Spitters. The Kelleys, in their personal capacities, guaranteed the obligation of PDRA and HBK to Spitters…