Judge: Frank M. Tavelman, Case: 24NNCV01150, Date: 2025-01-17 Tentative Ruling

Case Number: 24NNCV01150    Hearing Date: January 17, 2025    Dept: A

DEMURRER

NOTICE:

The Court is not requesting oral argument on this matter.  The Court is guided by California Rules of Court, Rule 3.1308(a)(1) whereby notice of intent to appear is requested.  Unless the Court directs argument in the Tentative Ruling, no argument is required and any party seeking argument should notify all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no argument is received.  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS: 

Gulf Harbour Investments Corporation (Plaintiff) brings this action against Indymac Bank, F.S.B. (Indymac), Christina Orsatti as Trustee of the Jean M. Nappi Trust (Orsatti), and Firstkey Mortgage (Firstkey).

Plaintiff alleges that on December 6, 2006, Charles Nappi (Charles) received an interest in the property at 431 Amherst Drive, Burbank, California (the Subject Property) via Grant Deed. (Compl. ¶ 8.) Plaintiff further alleges that on November 15, 2006, Charles executed a Promissory Note (the Note) encumbering the Subject Property (the Loan) from Indymac. (Compl. ¶ 9.) Plaintiff alleges that Charles also delivered a Deed of Trust (the Deed) encumbering the property to Indymac, which Indymac then recorded on December 4, 2006. (Compl. ¶ 9.)

Plaintiff alleges that thereafter, it purchased the Loan and all interest in the Note and Deed from Indymac. (Compl. ¶ 10.) Plaintiff states that despite this purchase, there remains a gap in the title for the Subject Property because Indymac failed to record an Assignment of Deed to Plaintiff, and the entity is now defunct. (Compl. ¶ 10.) Plaintiff alleges that it is entitled to an equitable assignment from Indymac to clear up any perceived break in the chain of title. (Compl. ¶ 11.)

Plaintiff’s Complaint states causes of action for (1) Equitable Assignment of Lien (as against all Defendants) and (2) Declaratory Relief (as against all Defendants). On June 6, 2024, Plaintiff amended its Complaint to replace named Defendant Charles with Orsatti.

Before the Court is a demurrer to the Complaint brought by Orsatti. Orsatti first demurs to the entirety of the Complaint on grounds that plaintiff lacks standing to bring this action. Orsatti also demurs to each cause of action on grounds that they (1) fail to state sufficient facts and (2) are fatally uncertain. The Court notes that no Motion to Strike is briefed or presented in Orsatti’s moving papers despite her reserving a hearing for a “Demurrer with Motion to Strike”.

Plaintiff has not opposed the demurrer. A plaintiff’s failure to oppose the demurrer can be treated as an implied abandonment of the challenged claims. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 20.)

ANALYSIS: 

I.                    LEGAL STANDARD 

Demurrer

The grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (C.C.P. § 430.30(a); Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.) A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) The only issue involved in a demurrer hearing is whether the complaint states a cause of action. (Id.)

A demurrer assumes the truth of all factual, material allegations properly pled in the challenged pleading. (Blank v. Kirwan, supra, 39 Cal. 3d at p. 318.) No matter how unlikely or improbable, the plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.  App. 3d 593, 604.) But this does not include contentions; deductions; conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.  (Blank, supra, 39 Cal. 3d at 318.)

Pursuant to C.C.P. §§ 430.10(e) and (f), the party against whom a complaint has been filed may demur to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action, or that the pleading is uncertain, ambiguous and/or unintelligible. It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1082.)

II.                 MERITS

Meet and Confer

C.C.P. §§ 430.41(a) requires that the moving party meet and confer with the party who filed the pleading that is subject to the demurrer. Upon review the Court finds the meet and confer requirements were met here. (Matejcek Decl. ¶ 4.)

Judicial Notice

Orsatti requests Judicial Notice be taken of the following documents:

1.      Quitclaim Deed 11-28-2006 – Jeanne M. Nappi, A married woman, wife of grantee conveying 431 Amherst Dr, Burbank, CA 91504 to Charles C. Nappi, recorded it with the Los Angeles County Recorder’s Office on December 4, 2006, Instrument No. 20062680400.

2.      Deed of Trust with Future Advance Clause 11-24-2006 – Charles C. Nappi, A married man as his sole as separate property, incurred a Deed of Trust as Trustor with Lender IndyMac Bank, F.S.B., as Beneficiary, recorded with the Los Angeles County Recorder’s Office on December 4, 2006, Instrument No. 20062680401.

3.      Quitclaim Deed 02-05-2015 – granted by Jeanne M. Nappi to Jeanne M. Nappi, as Trustee of the Jenna against 2166 Fitzgerald, Commerce, CA to Aztec T.D. Service Co., as trustee, securing $240,000.00 owed to First Choice Funding, the beneficiary, recorded in Los Angeles County Recorder’s Office on October 8, 2019, Doc No. 20191061996.

4.      Deed of Trust With Absolute Assignment of Rents 02-25-2020 – granted by Mirna Banos and Jose Vinicio Rodriguez as Joint Tenants against 2166 Fitzgerald, Commerce, CA to First American Title Company., as trustee, securing $255,000.00 owed to Golden Empire Mortgage, Inc., the beneficiary, recorded in Los Angeles County Recorder’s Office on February 25, 2020, Doc No. 20200220727.

5.      Grant Deed 02-25-2020 – Mirna L. Banos conveying 2166 Fitzgerald, Commerce, CA to Jose Vinicio Rodriguez and Mirna L. Banos, husband and wife as Joint Tenants, recorded in Los Angeles County Recorder’s Office on February 25, 2020, Doc No. 20200220726.

The Court notes that a party requesting judicial notice of material under Evidence Code section 452 or 453 must provide the court and each party with a copy of the material. (CRC Rule 5.115.) The only exception to this rule is where the matter to be noticed is already a part of the Court’s record, in which case the requesting party must specify the portion of the record to be noticed. (Id.) Here, Orsatti’s request is unaccompanied by the records to be noticed. Nor are the records to be noticed a part of the Court’s record. Accordingly, Orsatti’s request is DENIED.

Demurrer for Lack of Standing – Overruled

The Court first addresses Orsatti’s demurrer to the entire Complaint on grounds that Plaintiff does not have standing to sue. (C.C.P. § 430.10(b).) Orsatti argues:

Plaintiff is not the originator of the promissory note and deed of trust at issue, has not produced an assignment of the deed of trust, has not alleged possession of a promissory note that contains an allonge or is endorsed in blank, and therefore has not sufficiently alleged it has an equitable right to payments, debt or claims against Amherst Drive or standing to sue for Equitable Assignment of Lien.

(Dem. p. 7.)

The Court finds this argument unpersuasive. "In general terms, in order to have standing, the plaintiff must be able to allege injury - that is, some invasion of the plaintiff's legally protected interests.” (Angelucci v. Century Supper Club 41 Cal.4th 160, 175 [internal quotation marks omitted].) A demurrer lies for lack of standing when the defect appears on the face of the pleading or from judicially noticeable matters. (Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.App.4th 734, 752.)

Here, Plaintiff has explicitly alleged that it purchased the Loan and all interests in the Note and Deed from Indymac. (Compl. ¶ 10.) Plaintiff further alleges that it, “…is the current holder and in possession of the original Note, the current payee under the Note, and is duly authorized to enforce the terms of the Note and Deed of Trust.” (Id.) As such, the Court finds Plaintiff has sufficiently pled its standing to state its claim. The Complaint clearly asserts that Plaintiff is the owner of the Note and seeks a declaration that the Deed was assigned to it by virtue of purchase from Indymac. Further, Plaintiff has adequately pled injury in the form of the gap in the chain of title for the Subjects Property.

Accordingly, the demurrer on these grounds is OVERRULED.

First COA – Equitable Assignment of Lien – Sustained with Leave to Amend

As concerns Plaintiff’s first cause of action is for “Equitable Assignment of Lien”, the Court agrees with Orsatti that the cause of action is uncertain as currently pled. To begin, the Court is unaware of a legally cognizable cause of action for “Equitable Assignment of Lien”. While the concepts of “Equitable Lien” and “Equitable Assignment” have basis in case law, no authority supports Plaintiff’s specific cause of action here. Nor do the factual allegations in the Complaint make clear whether a cause of action for Equitable Lien or Equitable Assignment are being stated.

Equitable Assignment is a legal concept which has developed through case law to address situations where the existence of an assignment is implied from the conduct of the parties rather than established by express words of formal agreement. (First Nat. Bank of Stockton v. Pomona Tile Mfg. Co. (1947) 82 Cal.App.2d 592, 606 [citation omitted].) Though not specifically provided for by statute, courts have founds a variety of situations warrant finding that an assignment was created in equity. (Id.) Despite this seemingly broad applicability of equitable assignments, the Court is unpersuaded that such an assignment is at issue here.

In Recorded Picture Co. v. Nelson Entertainment, Inc. (1997) 53 Cal.App.4th 350 (Nelson), the Second District Court of Appeal observed that, “The doctrine of equitable assignments is typically used to enforce an attempted assignment of rights that is technically defective or to create a right of subrogation.”

Neither case cited by Nelson concern situations where an actual assignment existed but was not properly recorded. Kelly v. Kelly (1938) 11 Cal.2d 356 concerned the creation of an equitable assignment where an interest in property had not yet shifted to an intended beneficiary under trust. (Id.) The Kelly court found that, “[E]quity will uphold assignments, not valid at law…which are vested, but relate to property to come into existence in the future, and those which rest only in possibility…” (Id. at 364.) In the Court’s estimation, Kelly did not contemplate the situation alleged here.

The second case cited in Nelson, Fidelity National Title Ins. Co. v. Miller (1989) 215 Cal.App.3d 1163, 1174 (Fidelity), is similarly inapposite. Fidelity described equitable assignment as, “…a creature of equity and applies to all cases where one party involuntarily pays a debt for which another is primarily liable and which in equity and good conscience should have been paid by the latter.” (Fidelity supra, 215 Cal.App.3d at 1174.) In other words, Fidelity observed that the concept of equitable assignment was essentially akin to what is modernly referred to as a right of subrogation. Fidelity simply does not provide guidance in the instant case.

In short, none of the existing authority discussing Equitable Assignments indicate that such a cause of action is applicable here. The same can be said of a cause of action for Equitable Lien.

An Equitable Lien, “…is a right to subject property not in the possession of the lienor to the payment of a debt as a charge against that property…It may arise from a contract which reveals an intent to charge particular property with a debt or out of general considerations of right and justice as applied to the relations of the parties and the circumstances of their dealings.” (County of Los Angeles v. Construction Laborers Trust Funds for Southern California Admin. Co. (2006) 137 Cal.App.4th 410, 415.)

“It has been judicially observed that equitable liens arising by contract are as various as the contracts parties may make, and the question whether a lien has been created under particular circumstances depends upon the facts of the case…For example, where a lessor contracted to purchase insurance on behalf of both the lessor and the lessee but purchased protection for itself only, and a loss ensued for which the lessor was reimbursed, the lessee is entitled to an equitable lien on the insurance proceeds.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 454, citing Gordon v. J. C. Penney Co. (1970) 7 Cal. App. 3d 280, 285.)

Here, the Court does not view Plaintiff’s allegations as pled support a cause of action for Equitable Lien as against Orsatti. The cases discussing equitable liens all concern situations where the party seeking to enforce the lien and the party against whom it was to be enforced were in direct contract with another. This is important because the intent of the parties to encumber the property at issue is a crucial determination in whether to create an equitable lien. (See In re Cedar Funding, Inc. (Bankr. N.D. Cal. 2009) 408 B.R. 299 [discussing California law].) Conversely, the assignment at issue in this case has nothing to do with the intent of the initially contracting parties to encumber the Subject Property. The dispute here is not whether the Subject Property is encumbered under the original lien. Rather, the dispute is whether Plaintiff is now the lawful holder of said lien. In the Court’s view, these allegations are simply not the subject of an action for equitable lien.

Upon thorough search, the Court is unable to locate any case where an equitable assignment or equitable lien was granted in favor of an assignee as the result of a previous lienholder’s failure to record an assignment. This is not to say that such causes of action are unavailable to Plaintiff, only that the first cause of action is stated so ambiguously that determining the sufficiency of its factual allegations is impossible. Further, by apparently combining a cause of action for Equitable Assignment with that of an Equitable Lien, Plaintiff has presented significant difficulty for Orsatti in responding. 

Accordingly, the demurrer to the first cause of action is SUSTAINED with 20 days’ leave to amend. Leave to amend is granted in so far as the Court finds its possible Plaintiff could amend the Complaint to state a more cognizable cause of action for either Equitable Assignment or Equitable Lien.

Second COA - Declaratory Relief – Overruled

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.)

Orsatti argues that Plaintiff has not sufficiently stated a cause of action for Declaratory Relief because they have not alleged an actual controversy. Orsatti states the following:

Given that Plaintiff is not the originator of the promissory note and deed of trust at issue, has not produced an assignment of the deed of trust, and has not alleged possession of a promissory note that contains an allonge or is endorsed in blank, Plaintiff has failed to show that there is an actual, present controversy that would warrant declaratory relief.

(Dem. p. 8.)

The Court finds Orsatti’s argument to be unpersuasive for reasons that mirror its analysis as to Plaintiff’s standing. As stated above, Plaintiff has specifically alleged that it is the holder of the Note and entitled to collect upon it. Whether Plaintiff can produce the Note and subsequently show they are entitled to a declaration proclaiming them to be the legal owner is a question beyond the purview of a demurrer. On the face of the pleadings, Plaintiff has demonstrated sufficient controversy as to the chain of title for the Subject Property.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

Christina Orsatti as Trustee of the Jean M. Nappi Trust’s Demurrer came on regularly for hearing on January 17, 2024, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

THE DEMURRER TO THE ENTIRE COMPLAINT FOR LACK OF STANDING IS OVERRULED.

THE DEMURRER TO THE FIRST CAUSE OF ACTION IS SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND.

THE DEMURRER TO THE SECOND CAUSE OF ACTION IS OVERRULED.

CASE MANAGEMENT CONFERENCE IS CONTINUED TO APRIL 24, 2025 AT 9:00 AM.

DEFENDANT ORSATTI TO PROVIDE NOTICE.  

IT IS SO ORDERED.