Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

MOVING PARTY: Defendant Winhall 5, LLC  

 

RESPONDING PARTY: Plaintiff Michael L. Magasinn as Trustee of Shamsam Irrevocable   Trust 

 

BACKGROUND 

The action arises from alleged fraudulent transfers.  In 2006, East West Bank made a $5.3 million loan.  Behnam Rafalian and his brother Behrooz Rafalian gave East West Bank two deeds of trusts to secure commercial guarantees given by the brothers.  The deeds of trust encumbered the properties that are the subject of this action.  (Compl. ¶¶ 4, 25, 26, 47; Exs. A, B to Request for Judicial Notice (“RJN”).) 

In August 2022, Plaintiff obtained a $21 million judgment against Behnam.  (Compl. ¶ 24.)  Plaintiff alleges that before entry of judgment, Behnam and others engaged in numerous fraudulent transfers of the properties encumbered by the East West Bank deeds of trust.  (Compl. ¶¶ 27-34.) 

In December 2022, East West Bank assigned the 2006 deeds of trust to Winhall 5 LLC (“Moving Defendant”).  (Compl. ¶¶ 25, 48; Exs. C, D to RJN.)  Plaintiff alleges that when the deeds of trust were assigned to Moving Defendant, Moving Defendant had “full knowledge of the transfers that took place months before in anticipation of the recorded judgment.”  (Compl. ¶25.)   

Plaintiff alleges a single cause of action for declaratory relief against Moving Defendant: “An actual controversy has arisen between Plaintiff and Defendants governing the validity of the assignment to Winhall of the EWB Loan, Winhall’s knowledge of Plaintiff’s judgment lien and the transfers alleged above, and the priority of Winhall’s lien with respect to Plaintiff’s judgment lien as against the Property.”  (Id. ¶49.)  “Plaintiff requires a judicial declaration of the rights, responsibilities and obligations of the parties to this case, and each of them, with respect to the validity of Winhall’s lien and its priority against the Property.”  (Id. ¶50.) 

This hearing is on Moving Defendant’s demurrer to the complaint.  Moving Defendant argues that (1) Plaintiff does not have standing to challenge East West Bank’s assignment to Moving Defendant and (2) East West Bank recorded its deeds of trust in 2006, which has priority over Plaintiff’s judgment lien in August 2022 and Moving Defendant, as assignee, stands in the shoes of its assignor, East West Bank.  

LEGAL STANDARD 

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable.  (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 (in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents).)  For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)  

A demurrer to a complaint may be general or special.¿ A general demurrer challenges the legal sufficiency of the complaint on the ground it fails to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)¿ A special demurrer challenges other defects in the complaint, including whether a pleading is uncertain. (Code Civ. Proc., § 430.10, subd. (f).)¿ The term uncertain means “ambiguous and unintelligible.”¿ (Id.)¿ A demurrer for uncertainty should be sustained if the complaint is drafted in such a manner that the defendant cannot reasonably respond, i.e., the defendant cannot determine what issues must be admitted or denied, or what counts are directed against the defendant. (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿ 

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”).)  The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) 

MEET AND CONFER 

Code Civ. Proc. § 430.41 requires that before the filing of a demurrer the moving party “shall meet and confer in person or by telephone” with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.  (Code Civ. Proc. § 430.41(a).)  The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc. § 430.41(a)(2).)  Thereafter, the moving party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc. § 430.41(a)(3).)  Defendant submits the Declaration of Ryan C. Squire, which shows the parties failed to meet and confer “in person or by telephone.”  However, the Court cannot overrule a demurrer based on a determination that the meet and confer was insufficient.  (Code Civ. Proc. § 430.41(a)(4).)  The parties are cautioned, however, that any future failures to comply with meet and confer requirements will result in a continuance of their motion.    

REQUEST FOR JUDICIAL NOTICE 

 Moving Defendant requests judicial notice of two 2006 deeds of trust and two 2022 assignments of deed of trust, recorded in the Los Angeles County Recorder’s Office.  The Court grants the request pursuant to Evid. Code §§ 452(d), 452(h) and 453.  

DISCUSSION 

Moving Defendant argues that the 2006 deeds of trust are senior in priority to any judgment lien Plaintiff obtained in or after August 2022, and accordingly, Plaintiff’s claim seeking a declaration that his judgment lien is senior in priority must fail.  The Court agrees.   

California uses a “first in time, first in right system of lien priorities,” under which “a conveyance recorded first generally has priority over any later recorded conveyance.”  (Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1099; Civ. Code § 2897 (“Other things being equal, different liens upon the same property have priority according to the time of their creation …”.)   

East West Bank recorded its deed of trust in 2006.  (Exs. A, B to RJN.)  There is no dispute those deeds of trust were valid encumbrances against the subject properties.  Plaintiff did not obtain a judgment until August 2022, so it follows Plaintiff could not have had a judgment lien against the properties until August 2022 at the earliest.  Thus, the East West Bank deeds of trust were recorded “first” -- 16 years before the judgment was entered. 

Further, an assignment transfers the interest of the assignor to the assignee.  Thereafter, the assignee “stands in the shoes” of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.  (Manson Iver & York v. Black (2009) 176 Cal.App.4th 36, 49.)  By the assignment of the mortgage, the assignee took all rights of the assignor, including the right of priority.  (Schelling v. Thomas (1929) 96 Cal.App.682, 688.) 

Accordingly, Moving Defendant stands in the shoes of East West Bank, and therefore, as its liens were recorded before any judgment lien by Plaintiff, they have priority over Plaintiff’s judgment lien.    Given this ruling, the Court does not consider Moving Defendant’s additional argument that Plaintiff lacks standing to challenge the assignment.   

Plaintiff argues Moving Defendant engaged in misconduct in the foreclosure process.  But that is not a basis of the claims alleged in his complaint-in-intervention.  Plaintiff is not seeking a declaration that Moving Defendant engaged in any wrongdoing during the foreclosure process.  Rather, his claim for declaratory relief relates to whether Moving Defendant’s lien is valid and has priority over his judgment lien.  

Plaintiff argues that leave to amend should be granted so that it may allege Moving Defendant intends to proceed with the foreclosure sale in an inequitable fashion in order to enrich itself to Plaintiff’s detriment.  Given the liberal policy favoring amendments, the Court sustains the demurrer with 20 days’ leave to amend.   

CONCLUSION 

For the foregoing reasons, the Court SUSTAINS the demurrer with 20 days’ leave to amend.   

 

DATED:  November 3, 2023 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court