Judge: Armen Tamzarian, Case: 21STCV29839, Date: 2022-10-25 Tentative Ruling

Case Number: 21STCV29839    Hearing Date: October 25, 2022    Dept: 52

8/12/21: Plaintiff Victor Alarcon filed a complaint against defendants Epyon LLC, Christopher Alarcon, Susana Torres, Jorge Torres, and all persons unknown claiming any title… for:

5/23/22: Defendants Susana Torres and Jorge Torres filed a cross-complaint against Victor Alarcon for:

1)    Breach of Oral Contract

2)    Breach of Implied Contract

3)    Restitution

8/17/22:  The court granted Epyon and Christopher Alarcon’s motion for judgment on the pleadings as to the second and fourth causes of action.  The court granted leave to amend the second cause of action, but plaintiff did not amend.  This did not truly resolve the second cause of action against the Torreses because they were not the moving parties.  But that cause of action against them fails for the same reasons as the other defendants.

Related UD case, No. 21VEUD00576:

8/27/21: Plaintiff Epyon LLC filed an unlawful detainer complaint against defendant Victor Alarcon.

Subject Property and Parties

The subject property is a commercial property at 14536 Delano Street, Van Nuys, CA 91411.

Christopher Alarcon is Victor Alarcon’s son.  He is the sole member of Epyon LLC.  Susan Torres is Victor’s sister-in-law (the sister of his deceased wife, Rosa).  Jorge Torres is Susana’s husband.

Complaint’s Allegations

In 1993, Victor Alarcon, Rosa Alarcon, and non-parties Leo Herrera and Silvia L. Villagran (Herrera’s wife) bought the property at 14536 Delano Street.  It was subject to a deed of trust.  Victor Alarcon and Herrera operated an auto body shop there.  Herrera died in 1994.  Victor and Rosa Alarcon bought the property from Villagran.  In 1999, Victor and Rosa quitclaimed the property to themselves and four other non-parties (Juan Perez, Teresa Perez, Jose Medina, and Christina Medina) as tenants in common. 

In 2000, the trustee foreclosed on the property.  The trustee bought the property, then sold it back to Victor Alarcon for $340,000 with a carry-back loan at 10% interest.  For unspecified reasons, Victor Alarcon chose to have defendants Jorge and Susana Torres hold bare legal title to the property, but plaintiff retained a 100% beneficial interest.  Victor supplied the money for the $76,000 down payment and the payments on seller’s carry-back loan.  He paid rent to Jorge and Susana under a “fictional written lease agreement,” and they made loan payments.

In 2007, Jorge Torres paid off the loan and agreed that Victor Alarcon could pay him back at 6% interest instead of the 10% rate on the carry-back loan.  Through his auto shop (non-party Monza Auto Mechanic and Body Shop, Inc.), plaintiff made payments and satisfied the loan in 2016 or 2017.  The Torreses then planned to “sell” the property to plaintiff.  Plaintiff still thought he could not hold legal title to the property, so he got his son, defendant Christopher Torres to hold title to the property via Epyon LLC.  They had a “fictional” purchase price of $400,000 with a “fictional” $350,000 loan secured by a deed of trust.  Victor Alarcon paid rent under another “fictional lease” to Epyon. 

Plaintiff Victor made all the payments.  In 2021, Victor and Christopher Alarcon had a falling out.  Christopher told Victor he was going to digitize the property records and destroy the physical copies.  Christopher apparently did that, then denied Victor had any interest in the property.  Victor realized his son had duped him and brought this lawsuit.  Epyon then filed the unlawful detainer action against Victor.

Cross-Complaint’s Allegations

Susana and Jorge Torres allege Victor breached their agreement by suing them and therefore forced them to incur attorney fees defending this action.

Motion

           Susana and Jorge Torres move to sever the trial into three phases: (1) a bench trial on plaintiff’s equitable causes of action for quiet title and promissory estoppel; (2) a jury trial on plaintiff’s legal claims for fraud and conversion; and (3) a jury trial on the Torreses’  cross-complaint against plaintiff for attorney fees.

Equitable actions must be tried by the court first.  After judgment on the pleadings, the complaint only alleges quiet title against the Torreses.  They are only named because they are the beneficiaries of a deed of trust that was part of the sale from them to Epyon. 

Victor’s legal causes of action against Christopher and Epyon should be severed from the cross-complaint.  They have nothing to do with the Torreses.

If the court will not grant this motion in full, it should bifurcate the equitable claims now and rule on the other causes of action later. 

Opposition

Courts are not required to bifurcate equitable and legal issues.  The quiet title and promissory estoppel claims arise from the fraud claim against Epyon and Alarcon—for which plaintiff has a right to jury trial.  If they committed fraud, then the court should quiet title in favor of Victor. 

Defendants cite Nwosu v. Uba (2004) 122 Cal.App.4th 1229, where it made sense to try the equitable claims first because there were five of them and only one legal claim.

If the court does sever the trial, it should try the legal claims first.  There are common issues of fact, and the court will be required to follow the jury’s factual determinations.  Even if the court has a bench trial first and finds for defendants, there will still have to be a jury trial on plaintiff’s conversion claim.

Severing the cross-complaint from the rest of the trial is unnecessary because they all arise from the same facts.  It will have many of the same witnesses and testimony. 

Reply

Nwosu v. Uba controls.  There, too, the quiet title claim was intertwined with the fraud claim.  The number of equitable claims or legal claims makes no difference. 

Plaintiff admits his conversion claim has nothing to do with any other claim.  The Torreses have nothing to do with it.  And Christopher and Epyon have nothing to do with the Torreses’ cross-complaint.

Discussion

The Torreses have some good points, especially on conversion and the cross-complaint, but those issues are so small that it makes little sense to have multiple jury trials.  Either way, Judge Tamzarian should decide how to organize the trial.

The court has found no later case critiquing Nwosu v. Uba (2004) 122 Cal.App.4th 1229, but finds it suspect.  The facts are analogous here.  There, the court held a bench trial on quiet title (and other equitable claims) first.  In the bench trial, the court made factual findings that disposed of plaintiff’s legal claim for fraud.  But if they had tried the fraud claim first, the jury’s findings could have had an equivalent impact on the equitable claims.   It might seem that the right to a jury trial on fraud was denied.

Tentative Ruling:  

Defendants Susana Torres and Jorge Torres’s Motion to Trifurcate Trial

Defendants Susana Torres and Jorge Torres move to sever the trial of this action into three phases: (1) a bench trial on plaintiff Victor Alarcon’s first cause of action for quiet title and fifth cause of action for promissory estoppel; (2) a jury trial on plaintiff’s third cause of action for fraud and sixth cause of action for conversion; and (3) a jury trial on the cross-complaint by Susana Torres and Jorge Torres against plaintiff/cross-defendant Victor Alarcon.

Code of Civil Procedure section 598 gives courts discretion to choose to try some issues before others “when the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby.”     Similarly, section 1048(b) provides that a court may order a separate trial of any issue “in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy.” 

The court exercises its discretion to continue the hearing on this motion.  The final status conference is set for November 16, and the trial is set for November 30, 2022.  Judge Tamzarian will preside over the trial and therefore should decide this motion. 

Defendants Susana Torres and Jorge Torres’s motion to trifurcate trial is hereby continued to November 16, 2022, at 9:00 a.m.

8/12/21:
Plaintiff Victor Alarcon filed a complaint against defendants Epyon LLC,
Christopher Alarcon, Susana Torres, Jorge Torres, and all persons unknown
claiming any title… for:

5/23/22: Defendants Susana Torres and
Jorge Torres filed a cross-complaint against Victor Alarcon for:

1)    Breach of Oral Contract

2)    Breach of Implied Contract

3)    Restitution

8/17/22:  The court granted Epyon and Christopher
Alarcon’s motion for judgment on the pleadings as to the second and fourth
causes of action.  The court granted
leave to amend the second cause of action, but plaintiff did not amend.  This did not truly resolve the second cause
of action against the Torreses because they were not the moving parties.  But that cause of action against them fails
for the same reasons as the other defendants.

Related
UD case, No. 21VEUD00576:

8/27/21:
Plaintiff Epyon LLC filed an unlawful detainer complaint against defendant
Victor Alarcon.

Subject Property and Parties

The subject property is a
commercial property at 14536 and 14540 Delano Street, Van Nuys, CA 91411.

Christopher Alarcon is
Victor Alarcon’s son.  He is the sole
member of Epyon LLC.  Susan Torres is Victor’s
sister-in-law (the sister of his deceased wife, Rosa).  Jorge Torres is Susana’s husband.

Complaint’s Allegations

In 1993, Victor Alarcon,
Rosa Alarcon, and non-parties Leo Herrera and Silvia L. Villagran (Herrera’s
wife) bought the property at 14536 Delano Street.  It was subject to a deed of trust.  Victor Alarcon and Herrera operated an auto
body shop there.  Herrera died in 1994.  Victor and Rosa Alarcon bought the property
from Villagran.  In 1999, Victor and Rosa
quitclaimed the property to themselves and four other non-parties (Juan Perez,
Teresa Perez, Jose Medina, and Christina Medina) as tenants in common. 

In 2000, the trustee
foreclosed on the property.  The trustee
bought the property, then sold it back to Victor Alarcon for $340,000 with a
carry-back loan at 10% interest.  For
unspecified reasons, Victor Alarcon chose to have defendants Jorge and Susana
Torres hold bare legal title to the property, but plaintiff retained a 100%
beneficial interest.  Victor supplied the
money for the $76,000 down payment and the payments on seller’s carry-back
loan.  He paid rent to Jorge and Susana
under a “fictional written lease agreement,” and they made loan payments.

In 2007, Jorge Torres
paid off the loan and agreed that Victor Alarcon could pay him back at 6%
interest instead of the 10% rate on the carry-back loan.  Through his auto shop (non-party Monza Auto
Mechanic and Body Shop, Inc.), plaintiff made payments and satisfied the loan
in 2016 or 2017.  The Torreses then
planned to “sell” the property to plaintiff. 
Plaintiff still thought he could not hold legal title to the property,
so he got his son, defendant Christopher Torres to hold title to the property
via Epyon LLC.  They had a “fictional”
purchase price of $400,000 with a “fictional” $350,000 loan secured by a deed
of trust.  Victor Alarcon paid rent under
another “fictional lease” to Epyon. 

Plaintiff Victor made all
the payments.  In 2021, Victor and
Christopher Alarcon had a falling out. 
Christopher told Victor he was going to digitize the property records
and destroy the physical copies. 
Christopher apparently did that, then denied Victor had any interest in
the property.  Victor realized his son
had duped him and brought this lawsuit. 
Epyon then filed the unlawful detainer action against Victor.

Cross-Complaint’s Allegations

Susana and Jorge Torres
allege Victor breached their agreement by suing them and therefore forced them
to incur attorney fees defending this action.

Motion

           Epyon moves to expunge the lis
pendens on the subject property. 
Plaintiff’s claim lacks probable validity.  He bears the burden of proof.  He cannot prove fraud, that there was an
agreement that he was supposed to hold title to the property, or that
defendants never intended to perform the purported 2018 verbal holding
agreement.  The evidence shows plaintiff
and the Torreses wanted Christopher to own the property.  It was plaintiff’s and his late wife’s idea
to sell the property to him. 

           The statute of frauds bars this
action.  There can be no oral holding
agreement for title to real property. 
Because there is no actual fraud, there is no exception to the statute
of frauds.

           Plaintiff cannot deny his landlord
Epyon’s title.  He executed a written
lease.  Under Evidence Code § 624, a
tenant cannot deny the landlord’s title.

           The lis pendens is void for failing
to comply with the service and filing requirements.   It was not filed with the
court as required.  (True.)

There
is no evidence Christopher did not intend to perform the agreement in 2018 when
he made it.  Rather, plaintiff’s theory
is that Christopher started all this because he got mad at him for remarrying
in 2021, years later.  Also, plaintiff
cannot win on fraud because he did not allege a specific amount of
damages.  (Misstates the law.)

           If the lis pendens is not expunged,
plaintiff should be required to post an undertaking of $300,000.

           Epyon also moves for $7,875 in
attorney fees incurred in making this motion.

Opposition

Plaintiff
is likely to prevail.  A plaintiff can
quiet title to his beneficial interest against the legal title holder via
constructive or resulting trust imposed on the defrauding party.  The Torreses admit they only held bare legal
title as a favor to plaintiff.  Because
that was their interest in the property, they could not transfer to Epyon any
more than bare legal title.  Victor’s
other son, Alex, also corroborates his story. 

Chris
did not actually pay the down payment. 
The money he used came from Victor and Rosa selling another property to
Alex.  Chris claims he “borrowed it” from
Alex, but that is not credible.  He
testified that they never discussed a time frame for repayment or any amount of
interest.  There is no documentation of
the loan other than simply writing the words “commercial loan” on the memo of
the check.  It makes no sense that Alex
would lend $100,000 to Chris without any documentation or inquiry into how
Chris would use the money.

The
statute of frauds does not apply because there was actual or constructive fraud
and part performance.

The
fraud and promissory estoppel claims are not real property claims, so they are
irrelevant for this motion.

The
lis pendens is valid because plaintiff timely served it. 

Plaintiff
is not required to post an undertaking to maintain the lis pendens.  Epyon has no evidence supporting the amount
of $300,000 or showing why maintaining the lis pendens will damage it.  If the court expunges the lis pendens, it
should require Epyon to post an undertaking. 

Plaintiff
moves for $14,800 in attorney fees. 
Defendant’s motion was not made with substantial justification.

Reply

Due
10/18.  None in eCourt as of 2:45 on
10/20.

Discussion

Epyon
did not bring it up, but plaintiff probably has a heightened burden of proof
here.  “The owner of the legal title to
property is presumed to be the owner of the full beneficial title.  This presumption may be rebutted only by
clear and convincing proof.”  (Evid.
Code, § 662.)  Plaintiff therefore can
only obtain a judgment against Epyon if he rebuts Epyon’s presumption  of full beneficial title by clear and
convincing evidence.

The
declarations by Raquel Kovler and Patricia Flores in support of plaintiff’s opposition
are not dated.  There is currently no
reply or objection, but under CCP § 2015.5 the declarations must be dated to be
admissible. 

I
think ruling for Victor while criticizing him and his motives can help Epyon
accept the outcome and encourage the parties to settle.

Plaintiff
did a poor job establishing what is a crucial fact: the property is worth much
more than what Christopher/Epyon paid for it. 
The County Assessor’s records show its assessed value when sold in 2018
was $1.57 million ($725,000 for 14536 and $845,000 for 14540 Delano St).

Plaintiff
also did a poor job showing Christopher stole his gold.  He included the evidence but did a sloppy job
authenticating it, and the opposition never mentions it. 

Plaintiff also did not organize or separate the
exhibits in a reasonable way. 

This is the $100,000 “commercial loan” check, page
78 of 114 of the exhibits pdf, one of numerous separate documents comprising
“Exhibit P”:

           If it is a real loan from Alexander
to Christopher, why is the check made out to “Alexander and Christopher
Alarcon”?  

Tentative Ruling:  

Defendant Epyon, LLC’s Motion to Expunge Notice of Pendency of Action
(Lis Pendens) and Request for Attorney’s Fees and Costs

Defendant Epyon, LLC moves to expunge the lis pendens plaintiff Victor Alarcon recorded on August
19, 2021, for real property at 14536 and 14540 Delano Street, Van Nuys,
California 91411.  

Evidentiary Objections

           Plaintiff makes seven
objections to the declaration of Christopher Alarcon.  Objection Nos. 1-5 and 7 are overruled.  Objection No. 6 is sustained.

Probable Validity of Claim

CCP § 405.30 provides that a party with an interest in the
real property may move to expunge a lis pendens.  Section 405.32 provides that “the court shall
order that the notice be expunged if the court finds that the claimant has not
established by a preponderance of the evidence the probable validity of the
real property claim.”  Plaintiff must
show “it is more likely than not that [he] will obtain a judgment against the
defendant on the claim.”  (CCP § 405.3.)

Plaintiff establishes the probable validity of his cause of
action for quiet title.  He claims
equitable title to the property.  Generally, “the holder of equitable title
cannot maintain a quiet title action against the holder of legal title.  [Citation.] 
But an exception exists ‘when legal title has been acquired through
fraud.’  [Citation.]  In that case, available ‘remedies include
quieting title in the defrauded equitable title holder’s name and making the
legal title holder the constructive trustee of the property for the benefit of
the defrauded equitable titleholder.’ ” 
(Liberty National Enterprises, L.P. v. Chicago Title Ins. Co. (2013)
217 Cal.App.4th 62, 81, citing Warren v. Merrill (2006) 143
Cal.App.4th 96, 113-114.)

Plaintiff first acquired an
interest in the subject property in 1993. 
(Alarcon Decl., ¶ 3, Ex. A.)  He
lost his interest in the property in 2000 after a foreclosure sale.  (Id., ¶¶ 7-8.)  Plaintiff sought to purchase the property
again but, for unspecified reasons, wanted “to have someone else hold legal
title to the Property on [his] behalf.” 
(Id., ¶ 9.)  To that end,
he entered an agreement with defendants Jorge and Susana Torres to purchase the
property as record title holders on his behalf. 
(Id., ¶ 10.)  He paid the
down payment, monthly payment, and the property’s expenses.  (Id., ¶¶ 10-12.) 

The Torreses do not dispute these
facts.  In their cross-complaint, they
allege plaintiff “asked [them] to take title of the real property… in [their]
name,” and told them “there would be no costs of any kind to Cross-Complainants
if they agreed to take title to the Property and/or otherwise assist Victor
Alarcon and Rosa Alarcon in connection with the Property.”  (Cross-Comp., ¶ 6.)   “Based on these representations,” they
agreed to “take title of the Property in their name and Victor Alarcon would
pay any costs Cross-Complainants incurred relating to the Property.”  (Ibid.) 

Jorge Torres’s deposition testimony
also corroborates these facts.  He
testified, “Victor Alarcon and Rosa Alarcon asked us to be on title to this
property and… the verbal agreement that we had was that Victor Alarcon asked us
to hold title and they told us that we would never be responsible for any
expenses, we would not lose a penny.” 
(Goldstein Decl., Ex. M, J. Torres Depo., 51:16-23.)  He further testified:

Q. Why do you keep saying that the agreement was for you to hold title to
the property?

A. That’s what they told us.  That
was the favor that they asked us to do.

(Id. at 51:24-52:2.)  Victor Alarcon paid the Torreses the money to
pay the property’s “[m]ortgage, taxes, [and] insurance.”  (Id. at 62:13.)  By operation of law, the Torreses were
trustees of a resulting trust on plaintiff’s behalf. 

In 2018, Christopher Alarcon
created Epyon, LLC for the purpose of holding title to the subject
property.  The preponderance of the evidence
shows Christopher and Epyon did so as part of an agreement with Victor Alarcon
to hold legal title to the property on his behalf.  Victor testifies to that agreement.  (V. Alarcon Decl., ¶ 21.)  Though he “believed that the Property was
actually worth approximately $2,400,000” (ibid.) and it is currently has
an assessed value of $1.6 million (id., ¶ 22.a., fn. 1), he orchestrated
a deal for the Torreses to transfer the property to Christopher for $400,000 (Id.,
¶¶ 21-22).  Christopher disputes this story
and states instead it was a legitimate sale. 
(C. Alarcon Decl., ¶ 6.)

Victor testified he provided the
money for the $100,000 down payment to Christopher through his other son,
Alexander.  (V. Alarcon Decl., ¶¶
28-37.)  Victor and his late wife sold a
residential property to Alexander for below market value.  (Id., ¶ 33.)  After a “cash out refinance,” Alexander had
“excess loan proceeds of approximately $250,000.”  (Id., ¶ 36.)  Victor “then directed Alexander to tender
$100,000 of those proceeds directly to Christopher for the Torres Epyon
transaction.”  (Id., ¶ 37.)

Christopher and Alexander dispute
how $100,000 from the residential property transaction was transferred to
Christopher, then to Epyon, then to the Torreses.  Alexander states, “In 2018, Christopher
approached me and told me he had an investment opportunity to purchase a piece
of commercial property and asked if he could borrow $100,000.00 to make the
purchase.  At the time Christopher
approached me, I did not know that he was referring to the [subject
property].  Christopher just told me he
had an investment opportunity and was hoping that I could help.”  (A. Alarcon Decl., ¶ 9.)  “I trust my brother, so I agreed to lend him
the $100,000.00.  At the time I lent
Christopher the money, he and I did not discuss repayment terms.  It was just understood that Christopher would
pay me back at some point or he would bring me in on his next real estate
opportunity.  Christopher still owes me
the money and he will pay me back one day.” 
(Id., ¶ 10.)

The ”commercial loan” story is
thin.  Alexander testified that the only
documentation of the loan is that he “wrote ‘commercial loan’ on the memo of
the check.”  (Goldstein Decl., Ex. O, A.
Alarcon Depo., 76:13-14.)  He testified
that he and Christopher did not discuss a repayment period or any
interest.  (Id., 76:6-11.)  Christopher similarly testified he has no
writing documenting the loan.  (Goldstein
Decl., Ex. N, C. Alarcon Depo., 134:11-12.) 
He testified that the terms of the loan are that “when [Christopher] was
ready to pay [Alexander] back, we would kind of just structure it favorable
terms to him for him doing me the favor.” 
(Id., 134:13-16.)  When
asked if he pays interest on the loan, Christopher testified, “If we agree to
it, I imagine, yes, I would like to pay interest, so…”  (Id., 134:22-23.)

These facts do not exhibit the
characteristics of a true loan.  Further
supporting plaintiff’s story is that Christopher was not his first choice to
replace the Torreses as holding bare legal title to the subject property for
him.  First, he asked his sister Raquel
Kovler to do it.  (V. Alarcon Decl., ¶
20; Kovler Decl., ¶¶ 3-10.)  After his
sister declined, Victor then asked Christopher to take legal title.  (V. Alarcon Decl., ¶ 20.) 

For reasons he has refused to
explain (Kovler Decl., ¶¶ 9-10), Victor has consistently wanted to own the
subject property without holding legal title to it.  The Torreses confirm they took legal title to
it on his behalf.  Jorge Torres testified
that they sold the property after “Victor Alarcon and Rosa Alarcon agreed to
structure a sale to Christopher.”  (J.
Torres Depo., 81:11-12.) 

It is more likely that, rather than
a generous below-market sale from the Torreses to benefit Christopher Alarcon,
the transfer to Epyon was another step in Victor’s efforts to manipulate his
family to engage in various under-the-table deals so he could have someone else
hold legal title to the property on his behalf.

Though not directly relevant to plaintiff’s real property
claim, other evidence casts doubt on Christopher Alarcon’s credibility.  (See CACI No. 107 [“if you decide that a
witness did not tell the truth about something important, you may choose not to
believe anything that witness said”].) 
In addition to the real property dispute, plaintiff’s verified complaint
alleges Christopher converted his personal property, including 100 gold coins,
a one-ounce bar of gold, and $40,000 in cash. 
(Comp., ¶¶ 70-75.)  Christopher’s
second amended verified answer denies those allegations.  (2d. Am. Answer, ¶¶ 40-45.) 

In his declaration in support of this motion, plaintiff again
says Christopher took his gold and cash: “Christopher then repudiated the 2018
Holding Agreement by claiming to be the owner of the Property and stole
$240,000 worth of my personal property, including 100 gold coins and one
1-ounce gold bar that I purchased for approximately $200,000.00.”  (V. Alarcon Decl., ¶ 42.)  He attaches exhibits showing he bought about
$100,000 of gold on July 21, 2020, and another $100,000 of gold on December 3,
2020.  (Id., Ex. K.) 

On December 11, 2020, Christopher sent Victor a text message
saying, “A package arrived for you,” followed by a photo of what appear to be
50 gold coins.  (V. Alarcon Decl., Ex.
K.)  Victor replied, “Got it hijo, looking
good.”  (Ibid.)  Christopher replied, “I put it away and
tomorrow will put it in the box.”  (Ibid.)  The next page shows text messages (with no
date specified) in which Victor asked, “Did you go to put the coins in the
safe?”  Christopher answered, “Yes.”  Victor replied, “Thank you hijo.”  (Ibid.)

Christopher Alarcon’s declaration in support of this motion
does not mention the gold or cash.  Aside
from the conclusory denial in Christopher’s verified answer, the record
contains no evidence rebutting plaintiff’s showing on conversion.

The two disputes parallel one another.  For the gold, the evidence shows Victor
bought it, and his son Christopher agreed to keep physical custody of it for
him.  Then, after their falling out in
2021, Christopher repudiated Victor’s interest in the gold.

For the real property, the evidence shows Victor bought it in
2000.  Jorge and Susana Torres agreed to
hold legal title for him, but Victor made all the payments for the
property.  When the Torreses wanted out
of the arrangement, Victor tried to make a deal with his sister to hold legal
title to the property for him.  After she
refused, Victor got Christopher to purchase the property.  All the money exchanged in the deal
originated from Victor.  As with the
gold, Christopher denied Victor’s interest in the real property after they
became estranged.

           The legal effect of these
facts is constructive fraud by Epyon against plaintiff.  Epyon
became a trustee of the property because plaintiff paid the purchase price to
give Epyon legal title.  “Ordinarily a
resulting trust arises in favor of the payor of the purchase price of the
property where the purchase price, or a part thereof, is paid by one person and
the title is taken in the name of another.” 
(Martin v. Kehl (1983) 145 Cal.App.3d 228, 238 (Martin).)  “‘The trust arises because it is the natural
presumption in such a case that it was their intention that the ostensible
purchaser should acquire and hold the property for the one with whose means it
was acquired.’ ”  (Ibid.) 

Even without actual fraud—i.e., a
false promise to abide by the oral holding agreement—plaintiff shows
constructive fraud. 
“Constructive fraud is a unique species of fraud applicable only to
a fiduciary or confidential relationship. 
[It] arises on a breach of duty by one in a confidential or fiduciary
relationship to another which induces justifiable reliance by the latter to his
prejudice.  [It] exists in cases in which
conduct, although not actually fraudulent, ought to be so treated—that is, in
which such conduct is a constructive or quasi fraud, having all
the actual consequences and all the legal effects of actual fraud.”  (Prakashpalan v. Engstrom, Lipscomb &
Lack (2014) 223 Cal.App.4th 1105, 1131, internal quotes and citations
omitted.)  Epyon held the property in a
resulting trust in favor of plaintiff and therefore owed him a fiduciary
duty.  (See Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 30 [trustees
owe fiduciary duty to beneficiaries].)

Assuming Christopher intended to
abide by the holding agreement when he made it, breaching that agreement has
all the actual consequences and legal effects of actual fraud on
plaintiff.  In making the agreement,
plaintiff put his trust and confidence in Christopher and Epyon to hold legal
title for him.  Though Christopher and
Epyon honored the agreement for years, ultimately breaching it constitutes
constructive fraud.  Refusing to enforce
the agreement would shield them from liability for breaching a fiduciary duty
to plaintiff and thereby deprive him of beneficial title to the property they
held in trust for him.

Statute of Frauds

Epyon argues the
statute of frauds bars plaintiff’s cause of action for quiet title because he
relies on an oral agreement to transfer property.  Both constructive and resulting trusts “are
involuntary trusts implied by law and exempt from the statute of frauds.”  (Martin, supra, 145 Cal.App.3d at p.
238; accord Calistoga Civic Club v. City of Calistoga (1983) 143
Cal.App.3d 111, 117–118.)  As discussed
above, plaintiff shows the probable validity of his cause of action for quiet
title via an involuntary trust.  The
statute of frauds does not apply.

Estoppel to Deny Landlord’s Title

Epyon also argues plaintiff is
estopped from denying Epyon’s title to the property because he is Epyon’s
tenant.  “A tenant is not permitted to
deny the title of his landlord at the time of the commencement of the
relation.”  (Evid. Code, § 624.)  This provision does not apply for two
reasons. 

First, plaintiff was in possession
of the property before entering the lease with Epyon.  “[T]he owner of real property who accepts a
lease thereof from another claimant, while he himself is in possession, and who
has not at any time received the possession from the lessor, is not estopped by
the lease from asserting his title as against such lessor.”  (Strong v. Baldwin (1908) 154 Cal.
150, 161; accord Davidson v. Ellmaker (1890) 84 Cal. 21, 23.) 

Second, this provision does not
apply because plaintiff shows constructive fraud.  “Fraud or misrepresentations used to induce
the lessee to enter into the lease relieve him from the estoppel to dispute the
lessor’s title.”  (Sands v. Eagle Oil
& Refining Co. (1948) 83 Cal.App.2d 312, 321.)

Failure to Timely File Lis Pendens

Epyon argues the lis pendens is void because plaintiff did
not timely file it after recording it.  A
plaintiff must serve the notice of pendency of action on defendants, record it,
then “[i]mmediately following recordation, a copy of the notice shall also be
filed with the court in which the action is pending.”  (CCP § 405.22.) 

Plaintiff did not file the notice of pendency of action
immediately following recordation. 
Plaintiff served the notice of pendency of action on Epyon on August 13,
2021, and had it recorded on August 19, 2021. 
(Simkin Decl., Ex. A.)  Plaintiff
did not file the notice of pendency of action with the court until September
30, 2022, after Epyon filed this motion. 
(Goldstein Decl., ¶ 10.)

Code of Civil Procedure section 405.23 provides, “Any notice
of pendency of action shall be void and invalid as to any adverse party or
owner of record unless the requirements of Section 405.22 are met for that
party or owner and a proof of service in the form and content specified in Section
1013a has been recorded with the notice of pendency of action.”  The provisions on expungement, sections
405.30 to 405.39, do not address defects in service or filing, but the Court of
Appeal has found “[a] nonstatutory ground also exists, such that a party
alleging a lis pendens is ‘void and invalid’ (§ 405.23) for defective service
may move for expungement on that basis.” 
(Rey Sanchez Investments v. Superior Court (2016) 244 Cal.App.4th
259, 263 (Rey Sanchez.))

The court finds that failing to immediately file the lis
pendens with the court did not make it void or invalid.  The cases addressing noncompliance with
section 405.22 as grounds for expungement all concern defects in service—not
filing.  (Rey Sanchez, supra, 244
Cal.App.4th at p. 263-265; Carr v. Rosien (2015) 238 Cal.App.4th
845, 855; McKnight v. Superior Court (1985) 170 Cal.App.3d 291,
300-301 [applying former statute].) 
Section 405.23 provides that a lis pendens is “void and invalid as to
any adverse party or owner of records unless the requirements of Section 405.22
are met for that party or owner.”  (CCP §
405.23.)  Filing is a general requirement
unrelated to any particular adverse party or owner.  By properly serving the lis pendens on Epyon,
plaintiff fulfilled the requirements of section 405.22 “for that party or
owner.”   

The purpose behind section 405.22 also supports this
conclusion.  “The notice requirement is
intended to assure that property owners receive prompt notice of the recording
of a lis pendens.  No plaintiff has the right
to ambush a property owner by surreptitiously recording a lis pendens.”  (Biddle v. Superior Court (1985)
170 Cal.App.3d 135, 137.)  Here, it is
undisputed that plaintiff properly served the lis pendens on Epyon but did not
file it with the court until over a year later. 
Proper service satisfied the purpose of section 405.22.  Plaintiff did not surreptitiously record the
lis pendens. 

Undertaking

           In the alternative, Epyon
moves for an order requiring plaintiff to post an undertaking of $300,000 to maintain
the lis pendens.  Upon such a motion, a
court may “require the claimant to give the moving party an undertaking as a
condition of maintaining the notice in the record title.  …  The
court may permit evidence to be received in the form of oral testimony and may
make any orders it deems just to provide for discovery by any affected
party.  An undertaking required pursuant
to this section shall be of such nature and in such amount as the court may
determine to be just.”  (CCP §
405.34.)  The purpose of such an
undertaking is to protect defendant from any “damages as a result of the
maintenance of the notice” of pendency of action.  (Ibid.; see Elder v. Carlisle Ins.
Co. (1987) 193 Cal.App.3d 1313, 1319 [applying former statute].)

           The court exercises its
discretion not to require an undertaking. 
Epyon makes only a conclusory argument that $300,000 would be the “just”
amount of an undertaking.  Epyon offers
no supporting evidence.  It fails to show
that maintaining the lis pendens is likely to cause it $300,000 in
damages. 

Attorney Fees

           In his opposition,
plaintiff moves for $14,800 in attorney fees from Epyon.  “The court shall direct that the party
prevailing on any motion under this chapter be awarded the reasonable
attorney’s fees and costs of making or opposing the motion unless the court
finds that the other party acted with substantial justification or that other
circumstances make the imposition of attorney’s fees and costs unjust.”  (CCP § 405.38.)

           The court finds Epyon
acted with substantial justification in making this motion.  Though the motion was unsuccessful, it was a
close call.   

Disposition

           The motion is denied.