Judge: Colin Leis, Case: 20STCV30775, Date: 2024-07-05 Tentative Ruling

Case Number: 20STCV30775    Hearing Date: July 5, 2024    Dept: 74

MOVING PARTY:                Intervenor/Defendant Wilmington Savings Fund Society, FSB,
as Trustee for Verus Securitization Trust 2020-2

RESPONDING PARTY:       Plaintiff Lela Ltanya Brown-Luke

Motions for Summary Judgment/Adjudication and for Sanctions

The court considered the moving papers, oppositions, and replies in connection with each motion.

BACKGROUND

            This action arises from a dispute over title to real property. Plaintiff Lela Ltanya Brown-Luke contends her late mother, Erma Vivian Brown, intended to leave real property to her children after her death via a revocable trust. Plaintiff contends her niece, Andrea Brown, obtained title to the property from Erma prior to Erma’s death by fraud or forgery. Plaintiff sued Andrea Brown and Andrea Brown’s father (Plaintiff’s brother) Andre Brown, several mortgage companies, and the notary who facilitated the transfer, for quiet title and related claims.

            The Court refers to decedent Erma Brown, plaintiff Lela Brown-Luke, and defendants Andrea and Andre Brown by first names for clarity, not out of familiarity or disrespect.

On February 26, 1958, Erma and her husband acquired title to the property located at 3976 3rd Ave., Los Angeles, CA 90008 (“the Property”). (UMF 1-2.) They took title as joint tenants. (UMF 2.) When Erma’s husband died in 2005, she became the sole owner. (UMF 6.)

            On January 24, 2014, Erma created the Erma Brown Revocable Trust (“the Trust”), naming herself as settlor and trustee. (UMF 8; D.Exhs. D, CC.) She deeded the Property to the Trust the same day. (D.Exh. D.) The Trust named Andre as first successor trustee after Erma’s death, followed by one Patricia Williams, followed by Plaintiff. (D.Exh. CC [Trust Document], ¶ 6.2, p. 0020.)

            The Trust provided for the distribution of its property upon Erma’s death as follows:

“If any of the children of the settlor survive her, the trustee shall divide the trust property into as many shares of equal market value as are necessary to create one share for each of the settlor’s children who survive her ... . The trust shall distribute one share outright to each of the settlor’s surviving children ... .”

(Id., ¶ 5.3(a), at p. 0019.)

            Defendant Andrea Brown is Andre’s daughter, Lela’s niece, and Erma’s granddaughter. (UMF 3-5.) Andrea claims Erma approached her and asked her to buy the Property from the Trust; Erma wanted to refinance her reverse mortgage, and she felt Andrea was the only member of the family who could afford the necessary transactions. (P.Exh. DD [Deposition of Andrea Brown], 88:9-89:3, 91:23-92:1.)

            Andrea contacted a real estate agent, Craig Brown, and a notary public, Mia Kemp, who facilitated Erma’s transfer of the Property from the Trust to Andrea. (See D.Exhs. S-V, EE [Deposition of Mia Kemp], FF [Deposition of Craig Brown].) On April 25, 2017, Andrea recorded a grant deed reflecting the transfer. (UMF 13-14.) Andrea concurrently recorded a deed of trust securing a mortgage of approximately $325,000.00 from Residential Bancorp, which refinanced Erma’s reverse mortgage. (D.Exhs. F, G.)

            On November 25, 2019, Andrea refinanced the Residential Bancorp mortgage with a $640,000.00 loan from Calculated Risk Analytics, LLC. The deed of trust for that loan (“the 2019 Deed”) was recorded on December 2, 2019. (UMF 17; D.Exh. I, J.) Wilmington Savings Fund Society (“Wilmington”) in its capacity as trustee, the moving party here, is the beneficial holder of the 2019 Deed to the Property according to a Corporate Assignment of the Deed of Trust recorded on April 19, 2021. (D.Exh. K.)

            On August 13, 2020, Plaintiff sued Andrea, Andre, Residential Bancorp, Calculated Risk Analytics, Mia Kemp, all persons known and unknown with an interest in the Property, and Does 1 through 30, asserting claims (1) to quiet title, (2) to establish a resulting trust, (3) to establish a constructive trust, (4-6) for cancellation of instruments, (7) for negligence by a notary public (Kemp), and (8) for partition. Plaintiff later added Wilmington by fictitious name amendment.

            On March 21, 2022, shortly before Plaintiff amended her complaint to name Wilmington as defendant, Wilmington filed a complaint in intervention against Plaintiff and against Andrea Brown. Wilmington asserts causes of action against Plaintiff for (1) quiet title, (2) declaratory relief, and (3) equitable subrogation. Its claims against Andrea are not at issue here.

            On March 2, 2023, Andrea moved for summary judgment on Plaintiff’s complaint. On July 3, 2023, the Court denied the motion. The Court found Plaintiff raised a triable issue whether Andrea obtained title to the Property via forgery or fraud. (See 07-03-2023 Minute Order [Plaintiff met her burden to raise a triable issue whether Erma’s signature on the grant deed was authentic].)

            On February 22, 2023, shortly before Andrea filed her motion, Wilmington filed the instant motion for summary judgment or, in the alternative, adjudication of each cause of action in its complaint, and inversely on several causes of action in Plaintiff’s complaint.

            On February 27, 2024, Plaintiff filed her opposition.

            On March 6, 2024, Wilmington replied.

JUDICIAL NOTICE

Wilmington’s Requests

Wilmington requests judicial notice of eleven documents recorded in the Official Records of Los Angeles County. The Court grants Wilmington’s request in its entirety pursuant to Evidence Code section 452.

Plaintiff’s Requests

Plaintiff requests judicial notice of the evidence it submitted in opposition to Andrea’s March 2023 motion for summary judgment. The Court grants Plaintiff’s request to establish that various sworn statements were made and evidence authenticated but does not consider them for their truth.

EVIDENTIARY OBJECTIONS

            Wilmington’s Objections

Plaintiff submitted all her evidence as part of her request for judicial notice. Wilmington attacks the grounds for judicial notice, but it does not object to the underlying evidence. As discussed above, the Court takes judicial notice of the existence of the evidence without relying on the truth of that evidence.

Plaintiff’s Objections

Plaintiff objects to Wilmington’s Exhibits A-K and S-V, all on the same grounds: that the exhibits purportedly lack foundation, contain hearsay, and are not properly authenticated. The Court overrules these objections in their entirety. Exhibits A through K are subject to judicial notice. Wilmington’s counsel attests Exhibits S through V were produced by Plaintiff during discovery.

Plaintiff also objects to the Declaration of Shannon Bush in its entirety and in various parts. The Court sustains Plaintiff’s individual objections Nos. 9 and 10, because Bush’s testimony lacks foundation. Plaintiff’s objections are overruled.

LEGAL STANDARD 

            “¿[A] motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.¿” (¿¿Code Civ. Proc., § 437c, subd. (c)¿¿.) The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (¿¿Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850¿¿.) If the moving party carries this burden, the burden shifts to the opposing party to make a prima facie showing that a triable issue of material fact exists. (¿¿Ibid.¿¿) Courts “¿liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.¿” (¿¿Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389¿¿.)

DISCUSSION 

            Wilmington moves for summary judgment on its own claims for Quiet Title and Declaratory Relief, and conversely on Plaintiff’s claims for quiet title and cancellation of instrument, on the grounds that (1) Plaintiff has no title to the Property, and (2) Wilmington is a bona fide encumbrancer for value that took title without notice of Plaintiff’s claims. (MPA, 1:11-14, 1:19-2:2.)

            Wilmington also moves for summary adjudication of its third cause of action for equitable subrogation because “pursuant to the refinance and not as a volunteer, the funds from the Wilmington loan were used to pay off and reconvey prior liens against the subject property.” (MPA, 1:15-18.)

            1. Title to the Property (Quiet Title, Declaratory Relief, and Cancellation of Instrument)

                        a. There is a triable issue whether Andrea Brown obtained title by fraud.

            Plaintiff’s entire case relies on her threshold allegation that Andrea either fraudulently induced Erma to deed her the Property or Andrea forged the deed she recorded. Wilmington argues it has carried its burden to show that no such fraud or forgery took place, and Plaintiff has raised no triable issue. The Court disagrees.

The Court already denied Andrea’s motion for summary judgment on this sole basis. (See 07-03-2023 Minute Order.) Plaintiff adduced evidence sufficient to raise a triable issue of fraud or forgery. That evidence has been judicially noticed and considered in support of Plaintiff’s opposition here.

There is a triable issue whether the deed to the Property was fraudulently obtained or forged.

b. Because there is a triable issue of fraud, there is a triable issue whether Plaintiff is a real party in interest as successor-beneficiary to a constructive trust.

Wilmington also argues Plaintiff is not a real party in interest entitled to sue for title to the Property, whether or not Andrea fraudulently obtained the deed from Erma.

Specifically, Wilmington contends “Plaintiff has no basis upon which to claim title to the Property because the trust documents do not bequeath or transfer any title to the Property ..., but rather direct[] the trustee upon the settlor’s death to distribute the trust estate into equal shares to the settlor’s ‘children’ ”. (MPA, 26:9-18.)

Plaintiff argues she has raised a triable issue that she has an equitable claim to the Property, whether or not she has shown she holds legal title. (Opp., 14:22-15:9.)

In general, a holder of equitable title to a property may not state a quiet title claim against the holder of legal title. (See Warren v. Merrill (2006) 143 Cal.App.4th 96, 112.) But case law imposes an exception for property obtained by fraud. (Ibid.) Where a purported legal titleholder obtained title to a property by fraud, the transfer is ineffective. (Ibid.) The purported titleholder in fact holds the property in constructive trust for the victim of its fraud. (Ibid.)

Here, Plaintiff has raised a triable issue whether Andrea obtained the Property by fraud. If Andrea obtained the Property by fraud, then the beneficial interest in the Property remained with the Trust. And when Erma died, Plaintiff – as one of Erma’s children – became entitled to a share of that beneficial interest.

Wilmington repeatedly emphasizes Plaintiff was only entitled to a share of the Trust property, and only after estate taxes were paid. But Wilmington does not explain how that intermediate step – dividing the Trust’s property amongst its beneficiaries – divests Plaintiff of her interest in individual pieces of Trust property, including the Property at issue.

Plaintiff raises a triable issue whether she has at least an equitable interest in the Property, such that she can pursue her claims to quiet title and cancel instruments as necessary.

2. Bona Fide Purchase for Value (Quiet Title, Declaratory Relief, and
Cancellation of Instrument)

            Wilmington also argues it must prevail on its own quiet title action, and Plaintiff’s must fail, because Wilmington was a bona fide purchaser or encumbrancer for value without notice of Plaintiff’s purported interest in the Property.

            “ ‘It is “black-letter law” that a bona fide purchaser for value who acquires his or her interest in real property without knowledge or notice of another’s prior rights or interest in the property takes the property free of such unknown interests.’ [Citations.] Conversely, ‘it is an equally well-established principle of law that any purchaser of real property acquires the property subject to prior interests of which he or she has actual or constructive notice.’ [Citation.] ‘Actual notice is defined as “express information of a fact,” while constructive notice is that “which is imputed by law.” ’ [Citation.]” (Vasquez v. LBS Financial Credit Union (2020) 52 Cal.App.5th 97, 107.)

Whether construed as an affirmative claim to quiet title or as an affirmative defense to Plaintiff’s claim, the argument requires Wilmington to establish three elements as a matter of law: (1) that Wilmington paid value for the Property; (2) that it did so in good faith; and (3) that it did not have actual or constructive notice of Plaintiff’s rights when it did so. (See Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1251.)

                        a. Wilmington paid valuable consideration for the Property.

            Wilmington advances the declaration of Shannon Bush, a paralegal employed by Wilmington’s loan servicer, Shellpoint Mortgage Servicing. (Bush Decl., ¶ 1.) Bush attests she reviewed Shellpoint’s database and it reflects that Wilmington’s predecessor-in-interest loaned Andrea Brown $640,000.00 on November 25, 2019, secured by a deed of trust to the Property recorded on December 2, 2019. (Id., ¶ 5; D.Exh. J.)

Ms. Bush’s testimony, accompanied by judicially-notice deeds, carry Wilmington’s burden to show it obtained its deed of trust for valuable consideration.

            Plaintiff objects to Wilmington’s evidence, but those objections have been overruled. She does not otherwise rebut Wilmington’s showing. Plaintiff raises no triable issue. The first element of Wilmington’s bona fide purchaser claim/defense is satisfied.

b. Wilmington has not established, beyond a triable issue, that it acquired the Property in good faith without notice.

            Although Wilmington demonstrates it purchased the Property for value, it fails to show it did not have notice of Plaintiff’s claim. In its papers, Wilmington cites several provisions of the Code of Civil Procedure and a treatise which affirm the rule that an encumbrancer who pays valuable consideration in good faith and who records his interest receives his interest free and clear of unrecorded claims unknown to him. (MPA, 14:5-10.)

Wilmington has established it paid valuable consideration and recorded its interest. (It is also undisputed that Plaintiff’s claim was unrecorded, so Wilmington cannot be ascribed constructive notice.) But on summary judgment, it is still Wilmington’s burden to also show that it obtained title to the Property in good faith and without actual knowledge of Plaintiff’s claim. Wilmington has offered no evidence that shows as much.

            To support its contention, Wilmington cites only to a single paragraph of Ms. Bush’s declaration:

“The Loan Records reflect that Shellpoint and Wilmington had no knowledge of Plaintiff[’s] ... alleged claims to the Property until January 2022.”

(Bush Decl., ¶ 10.)

            Plaintiff’s objection to this paragraph has been sustained. The statement lacks foundation. Ms. Bush does not explain how the records demonstrate what she claims. She states a conclusion or lay opinion without attesting to personal knowledge. Even if she did have personal knowledge or explain her conclusion, her single sentence of testimony, without more, would not carry Wilmington’s threshold burden on this dispositive motion.

            Wilmington has not carried its threshold burden at summary judgment to show that it purchased the Property in good faith without actual or constructive notice of Plaintiff’s claim.

            3. Equitable Subrogation

            Equitable subrogation requires (1) payment by a subrogee to protect personal interests, (2) that the subrogee did not act as a volunteer, (3) that the subrogee was not primarily liable for discharged debt, (4) that the entire debt was paid, and, crucially, (5) that the subrogation does not work an injustice to the rights of others. (See Caito v. United California Bank (1978) 20 Cal.3d 694, 704.)

            Although Wilmington may have established the first four elements of equitable subrogation, it has not established the fifth. There is a triable issue whether Andrea defrauded Erma out of title to the Property, thereby depriving Erma’s heirs of their interest. If the Court permitted Wilmington to cut off a right to property taken from Plaintiff by fraud, the result would work an injustice to Plaintiff’s rights.

            Wilmington has not shown it is entitled to prevail on its equitable subrogation claim.

SANCTIONS

            Wilmington has also moved for an order striking Plaintiff’s complaint and imposing monetary sanctions based on Code of Civil Procedure section 128.7.

Code of Civil Procedure section 128.7 obligates an attorney or unrepresented party not to make an argument or statement to the Court unless “(1) It is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation[;] (2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law[;] (3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery[; and] (4) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.”

There is no evidence that Plaintiff or her attorney filed this suit for an improper purpose, and they rely on nonfrivolous legal theories. Wilmington contends Plaintiff’s complaint is sanctionable because it lacks evidentiary support.

            In support of its motion, Wilmington argues that four categories of evidence demonstrate Plaintiff’s complaint is frivolous: (1) the contracts and recorded documents that demonstrate Erma’s transfer of the Property to Andrea; (2-3) the depositions of Ms. Kemp and Mr. Brown, who testify Erma had the capacity to transfer the Property to Andrea; and (4) Plaintiff’s own deposition, wherein she expressed confusion about the nature of, and grounds for, this lawsuit.

            Wilmington’s first three categories are unpersuasive. The Court already found there is a triable issue whether the alleged fraud occurred, based on Plaintiff’s substantial evidence that contradicts Wilmington’s contentions.

            As to the fourth: in opposition to Wilmington’s motion, Plaintiff’s counsel offers Plaintiff’s entire deposition transcript to contextualize Plaintiff’s statements. The transcript shows Plaintiff was confused throughout her deposition. Her sometimes poor understanding of the specifics of her suit do not demonstrate it was baseless from the outset.

CONCLUSION

            Based on the foregoing, the court DENIES the Intervenor-Defendant’s motion for summary judgment and DENIES its motion for sanctions.

            Plaintiff is ordered to give notice of this ruling. 

IT IS SO ORDERED.