Judge Gail Killefer, Case Number: 23STCV31492, Date: 2024-05-02 Tentative Ruling

MOVING PARTY: Defendant Jean Yang as an individual and trustee of the Living Trust of Jean S. Yang, Dated July 27, 2018

TENTATIVE: Defendants’ demurrer is sustained without leave to amend. The action is dismissed.

On December 26, 2023, Deuk Lee (“Plaintiff”) filed a Complaint against Mark Yang (“Mark”); Jean S. Yang (“Jean”) and The Living Trust of Jean S. Yang, Dated July 27, 2018 (the “Trust”); and Does 1 to 50.

The Complaint alleges three causes of action: (1) Fraudulent Transfer under the Uniform Transfer Act (Civ. Code § 3493), (2) Common Law Fraudulent Transfer; and (3) Conspiracy to Defraud.

On February 14, 2024, Defendant Jean individually and as Trustee of the Trust filed a Demurrer to Plaintiff’s Complaint. Plaintiff opposes the demurrer. The matter is now before the court.

The Court may take judicial notice of records of any court of record of the United States. (Evid. Code, § 452(d)(2).) However, the court may only judicially notice the existence of the record, not that its contents are the truth. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1565.)

1) Exhibit 1: Grant Deed; Duncan Alexander Wain and Theresa Ann Wain, grantors, and Jean S. Yang, a married woman as her sole and separate property, grantee, regarding the property located at 2409 Ives Lane, Redondo Beach, California (the “Property”), recorded May 15, 2002 as Los Angeles County Recorder's office Document No. 02-1116238.

2) Exhibit 2: Quitclaim Deed; Jean S. Yang, a married woman as her sole and separate property, grantor, and Casey Soung-Gi Yang and Jean S. Yang, husband and wife as joint tenants, grantees, regarding the Property, recorded May 21, 2002 as Los Angeles County Recorder's Office Document No. 02-173410.

3) Exhibit 3: Quitclaim Deed; Casey Soung-Gi Yang, a Spouse of Grantee, grantor, and Jean S. Yang, a Married Woman, as her sole and separate property, grantee, regarding the Property, recorded May 28, 2003 as Los Angeles County Recorder's Office Document No. 03-1505009.

4) Exhibit 4: Judgment, Los Angeles County Superior Court Case No. 19STCV21302 (Deuk Lee v. Mark Yang) filed March 11, 2020.

5) Exhibit 5: Complaint filed by Jean S. Yang, Trustee, Los Angeles County superior court case No. 21TRCV00693 (Jean S. Yang v. Deuk Lee) filed September 23, 2021.

6) Exhibit 6: Answer to Complaint filed by Deuk Lee, Los Angeles County No. 21TRCV00693 (Jean S. Yang v. Deuk Lee) filed December 3, 2023.

7) Exhibit 7: Order Granting Motion for Summary Judgment, recorded August 15, 2023 as Los Angeles County Recorder’s Office Document No. 20230540560.

Discussion

Where pleadings are defective, a party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.¿ (CCP § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s properly pled facts as true and ignores contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider whether a plaintiff will be able to prove the allegations or the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

The Complaint alleges that Defendants Jean and Mark were married in October 1989. (Compl. ¶ 11.) In December 2009, Mark borrowed $150,000.00 from Plaintiff. (Compl. ¶ 12, Ex. A.) The note was secured by a promissory note secured by a deed of trust as to 2409 Ives Lane, Redondo Beach, CA 90278 (the “Property”), dated March 15, 2012. (Compl. Ex. A.) The Complaint alleges that both Jean and Mark failed to pay the loan. (Compl. ¶ 17.)

On May 5, 2017, Jean and Mark filed for divorce. (Compl. ¶ 18.) On November 10, 2017, Mark and Jean entered a court stipulation for settlement of their divorce (the “Settlement”). (Compl. ¶ 21, Ex. C.) Unknown to Plaintiff, the Settlement made the Property the sole and separate property of Jean. (Compl. ¶¶ 22-24.) On May 4, 2018, the court entered judgment on the dissolution and Settlement.

On or about June 17, 2019, Plaintiff filed an action against Defendant Mark for breach of contract as to the Loan (LASC Case No. 19STCV21302). (Compl. ¶ 27.) Defendant Mark failed to appear, and judgment was granted in favor of Plaintiff in the sum of $240,162.21 on June 17, 2019. (Compl. ¶ 28.) Plaintiff asserts that it was not until July 27, 2022, that he became aware of Mark and Jean’s divorce and settlement, and that they now maintained that the Property was the sole property of the Trust. (Compl. ¶¶ 29, 31.)

The Complaint alleges that Plaintiff believes that Jean and Mark continue to reside in the Property together and that the divorce was solely done to defraud Plaintiff and prevent Plaintiff from collecting from Defendants any judgment Plaintiff had obtained. (Compl. ¶¶ 32, 34.)

The Complaint alleges that Defendant Mark is legally insolvent and that “the only asset available to Plaintiff to satisfy the Judgment was the transfer of the [Property] he made to Defendants.” (Compl. ¶¶ 35, 36.) Accordingly, by Defendants signing the Settlement, Defendants deprived Plaintiff of the ability to get paid. (Compl. ¶ 37.)

Defendants assert that because Plaintiff elected to file an action against Defendant Mark rather than foreclose on the Property, Plaintiff waived the right to foreclose on the property to secure the loan. CCP § 726 “is both a ‘security-first’ and ‘one-action’ rule: It compels the secured creditor, in a single action, to exhaust his security judicially before he may obtain a monetary ‘deficiency’ judgment against the debtor.’ [Citations.] In other words, ‘[a] secured creditor can bring only one lawsuit to enforce its security interest and collect its debt.’ [Citation.]” (National Enterprises, Inc. v. Woods (2001) 94 Cal.App.4th 1217, 1232.)

By filing LASC Case No. 19STCV21302 against Defendant Mark individually, Plaintiff elected a remedy that waived the right to foreclose on the property and recover from the pledged asset. He instead sought to enforce the debt against Mark individually. “[W]hen the creditor recovers a personal money judgment against the debtor without first foreclosing all of the security, the sanctions of the ‘one action’ rule are applied, and the creditor loses the liens on all property not foreclosed in that action.” Kirkpatrick v. Westamerica Bank (1998) 65 Cal. App. 4th 982, 988 [citation omitted].) “An election of remedies . . . occurs at the point the judgment attains finality when the claim is merged in the judgment.” (Id. at p. 990.)

Accordingly, Defendants assert that any alleged transfer of the Property from Mark to Jean did not affect Plaintiff’s right under the deed of trust to foreclose on the subject Property and it was Plaintiff’s actions that resulted in the waiver to foreclose.

C. Plaintiff’s Failure to File a Compulsory Cross-Complaint in the Quiet Title Action

(a) Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.

(1) The court in which the action is pending does not have jurisdiction to render a personal judgment against the person who failed to plead the related cause of action.

(2) The person who failed to plead the related cause of action did not file an answer to the complaint against him.

“The compulsory cross-complaint statute is designed to prevent ‘piecemeal litigation.’” (Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 564.) “Thus, a party cannot by negligence or design withhold issues and litigate them in successive actions; he may not split his demands or defenses; he may not submit his case in piecemeal fashion.” (Id. at p. 564.) “The statute is to be liberally construed to advance its purpose.” (Heshejin v. Rostami (2020) 54 Cal.App.5th 984, 993.)

Defendants note that on September 23, 2021, Defendant Jean as Trustee of the Trust filed an action for Quiet Title against Defendant Lee in LASC Case No. 21TRCV00693.

On its own motion, the court judicially notices the records of LASC Case No. 21TRCV00693 and the fact that the Plaintiff in this action on December 3, 2021, filed a verified Answer and a Cross-Complaint against Defendant Mark. Defendant Jean specifically sought to expunge the deed of trust dated March 15, 2012, because it clouded the title to the Property.

On January 27, 2023, the court awarded summary judgment in favor of Defendant Jean. (Min. Order, 1/23/23, LASC Case No. 21TRCV00693.) The court noted that because the first and second promissory notes were used as evidence to obtain Judgment against Defendant Mark in LASC Case No. 19STCV21302, “there was nothing left to recover from the property. Defendant therefore finds himself in precisely the situation described in Kirkpatrick; with a judgment but without the benefit of the lien.” (Id. at p. 6.) “All the evidence suggests the Deed of Trust was recorded to provide collateral only as to the December 31, 2009 loan and both the First Note and the Second Note documented that debt. Once judgment was entered on defendant’s behalf for that debt, the election of remedies had been made and foreclosure on the Deed of Trust was no longer available.” (Ibid.)

Consequently, the deed of trust dated April 11, 2012, was canceled, and deemed to no longer have further effect. (4/12/24 Judgment, LASC Case No. 21TRCV00693.) Title to the Property was quieted in favor to the Trust and as to any claim by Plaintiff Deuk Lee. (Ibid.) Moreover, because Plaintiff failed to appear for the prove-up hearing for the Cross-Complaint filed against Defendant Mark, the Cross-Complaint was dismissed due to failure to prosecute. (Ibid.)

Based on the above, Defendants assert that this action is barred because Plaintiff failed to assert the claims in this action in a cross-complaint in LASC Case No. 21TRCV00693. The court agrees that CCP § 426.30 bars Plaintiff’s present action because the claims asserted arise out of the same operative facts as the LASC Case No. 21TRCV00693. The court had jurisdiction over Plaintiff at the time the judgment in the underlying action was entered. (See Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 970 [ “‘Only related causes of action that exist at the time of service of the answer to the complaint on the particular plaintiff are affected by Section 426.30’ ”]; see also AL Holding Co. v. O'Brien & Hicks, Inc. (1999) 75 Cal.App.4th 1310, 1313–1314 [accord].)

Defendants’ demurrer is sustained without leave to amend. The action is dismissed.

[1] Defendants have failed to file a declaration showing compliance with CCP § 430.41. “Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (CCP § 430.41(a)(4).) As the failure to meet and confer does not constitute grounds to overrule a demurrer, the court continues on the merits.