Judge: George F. Bird, Jr., Case: 21CMCV00271, Date: 2023-03-16 Tentative Ruling

“INSTRUCTIONS:
If the parties wish to submit on the tentative ruling and avoid a court
appearance on the matter, the moving party must:

1. Contact the opposing party and all other
parties who have appeared in the action and confirm that each will submit on the
tentative ruling.

2. No later than 4:00 p.m. on the court day
before the hearing, call the Courtroom (310-761-4302) advising that all parties
will submit on the tentative ruling and waive hearing; and

3. Serve notice of the Court's ruling on all
parties entitled to receive service.

If this procedure is followed, when the case is
called the Court will enter its ruling on the motion in accordance with its
tentative ruling. If any party declines to submit on the tentative ruling, then
no telephone call is necessary, and all parties should appear at the hearing.
If there is neither a telephone call nor an appearance, then the matter may
either be taken off calendar or ruled on. 

Case Number: 21CMCV00271    Hearing Date: March 16, 2023    Dept: B

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES – SOUTH CENTRAL DISTRICT

I.       BACKGROUND

            Plaintiff Ricky Carrell (“Plaintiff”) alleges that at all times he was the lawful owner of a property located at 819 W 105th Street, Los Angeles, California 90044 (the “Property”). (First Amended Complaint (“FAC”), ¶ 9.) Plaintiff alleges that in 2005 the Property suffered damage from a fire. (FAC, ¶ 12.) Plaintiff was allegedly approached by a contractor who offered to reconstruct the Property and presented Plaintiff with a Deed of Trust in favor of Statewide Funding. (FAC, ¶ 13.) Plaintiff alleges that the loan was predatory and was fraudulently procured through deceit. (FAC, ¶ 14.) Plaintiff alleges that the Superior Court rendered a judgment on April 20, 2009, that the loan was predatory and improperly originated. (FAC, ¶ 15.)

            Plaintiff allegedly received a demand for $419,756.95 for payment of the debt and seeking foreclosure on the Property from Defendant Redwood Trust Deed Services, Inc. (FAC, ¶ 20.) Plaintiff alleges that Defendant Mark Schulman claims to be the owner of the Property after purchasing the Property at a defective trustee sale. (FAC, ¶ 22.)

II.       MOTION TO EXPUNGE LIS PENDENS

A.    Motion filed February 2, 2022.

            Intervener Radical Enterprises, Inc. (“REI”), brought an ex parte application seeking leave to intervene and to expunge the lis pendens filed on the Property by Plaintiff. REI alleges that on August 11, 2022, the Property's record title holder, Defendant Mark Schulman

as Trustee of the Mark Schulman 401(K) Profit Sharing Plan-Roth Account, granted fee simple

title to the Property to REI by Grant Deed. The Grant Deed was allegedly recorded in the Official Records of the Los Angeles County Recorder's Office on August 23, 2022. On August 31, 2022, Plaintiff allegedly recorded a defective Notice of Pendency of Action (“Notice”).

            REI argues that the Notice has a defective Proof of Service attached, that Plaintiff failed to serve all defendants with the Notice, and Plaintiff failed to serve REI with the Notice. REI further argues that the Notice is void because it references the Verified Complaint which is not the operative complaint in this action. Finally, REI argues that the Notice is void because REI is a bona-fide purchaser for value without notice, thus the action does not involve a ‘real property claim’ which is required to support a lis pendens. REI seeks an award of reasonable attorney’s fees and costs for bringing this motion.

B.     Opposition filed March 7, 2023.

            Under Code of Civil Procedure section 1005, subdivision (b), an opposition to a motion to expunge lis pendens is due nine (9) court days before the hearing. The opposition deadline was March 3, 2023. Plaintiff filed their opposition on March 7, 2023. While the Opposition is untimely, the court has discretion to consider late papers. (Cal. Rules of Court, rule 3.1300 subdivision (d).) As this Court prefers to resolve of disputes on the merits, and REI was able to file a Reply, this Court will consider the Opposition.

            Plaintiff argues that the Notice was properly served on Defendant Mark Schulman and that no notice was required for Mark Schulman 401(K) Profit Sharing Plan-Roth Account because Mark Schulman and Mark Schulman 401(K) Profit Sharing Plan-Roth Account are one in the same for practical and legal purposes. Plaintiff also argues that notice to Defendant Redwood Trust Deed Services, Inc. was unnecessary because a Declaration of Nonmonetary Status as trustee was filed by Defendant Redwood Trust Deed Services, Inc., so they have ceased participating in the lawsuit. Plaintiff alleges that the defective notice requirements are moot as Plaintiff has mailed an amended notice to Defendant Mark Schulman and REI.

            Plaintiff also argues that REI is not a bona-fide purchaser for value without notice because this lawsuit was filed before REI acquired interest in the Property and Defendant Mark Schulman, the seller of the Property to REI, was aware of the lawsuit. Plaintiff argues that REI had actual, constructive, or inquiry notice of Plaintiff’s claim and therefore cannot be a bona-fide purchaser for value without notice.

            Plaintiff argues that sanctions should not be enforced for asserting the statutory right to file a lis pendens.

C.     Reply filed March 9, 2023.

            REI advances the same theories presented in the motion demonstrating that the Notice is void. REI argues that public policy supports expunging the lis pendens and awarding attorney’s fees and costs to REI.

III.       LEGAL STANDARDS

            “ ‘A lis pendens is a recorded document giving constructive notice that an action has been filed affecting title to or right to possession of the real property described in the notice.’ (Urez Corp. v. Superior Court (1987) 190 Cal.App.3d 1141, 1144, 235 Cal.Rptr. 837.) A lis pendens may be filed by any party in an action who asserts a ‘real property claim.’ (Code Civ. Proc., § 405.20.)” (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 647 [15 Cal.Rptr.3d 805, 808, 93 P.3d 395, 398].) Code of Civil Procedure section 405.22 provides the proper procedure for serving the lis pendens prior to recording.

            “Section 405.30 allows the property owner to remove an improperly recorded lis pendens by bringing a motion to expunge.” (Ibid.) Under Code of Civil Procedure section 405.30 the party opposing the motion to expunge has the burden of proof. A lis pendens may be expunged for several reasons including failure to properly serve the notice or that the complaint does not contain a ‘real property claim.’ (Code Civ. Proc., § 405.23; Code Civ. Proc., § 405.31.)

IV.       REQUEST FOR JUDICIAL NOTICE

            REI requests that this Court take judicial notice of five documents: (1) The "Notice of Default and Election to Sell Under Deed of Trust" ("NOD") that was recorded in the Official Records of the Los Angeles County Recorder's Office on February 19, 2021, as Instrument No. 20210280311; (2) The "Notice of Trustee's Sale Under Deed of Trust" ("NTS") that was recorded in the Official Records of the Los Angeles County Recorder's Office on May 26, 2021, as Instrument No. 20210840808; (3) The "Trustee's Deed Upon Sale" that was recorded in the Official Records of the Los Angeles County Recorder's Office on November 9, 2021, as Instrument No. 20211669943; (4) The Grant Deed that was recorded in the Official Records of the Los Angeles County Recorder's Office on August 23, 2022, as Instrument No. 20220839920; and (5) The Notice of Pendency of Action that was recorded in the Official Records of the Los Angeles County Recorder's Office on September 12, 2022, as Instrument No. 20220890029.

            The Court will take judicial notice of the fact that these documents were filed with the Los Angeles County Recorder’s Office, as such a fact is capable of accurate determination by resorting to a source of reasonably indisputable accuracy. (Evid. Code § 452, subd. (h).) The Court will not take judicial notice of the facts alleged within these documents as the content is reasonably subject to dispute.

V.       DISCUSSION

A.    Service of the Notice.

            Under Code of Civil Procedure 405.22, prior to a claimant recording a notice of pendency of action, claimant shall “cause a copy of the notice to be mailed, by registered or certified mail, return receipt requested, to all known addresses of the parties to whom the real property claim is adverse and to all owners of record of the real property affected by the real property claim as shown by the latest county assessment roll.… Immediately following recordation, a copy of the notice shall also be filed with the court in which the action is pending.”

            Plaintiffs have failed to comply with Code of Civil Procedure section 405.22 by failing to serve all owners of record of the real property affected by the real property claim. REI has demonstrated that REI obtained title to the Property at issue through a Grant Deed which was recorded in the Official Records of the Los Angeles County Recorder's Office on August 23, 2022. (REI’s Request for Judicial Notice (“RJN”), Exhibit 4.) The Notice at issue was recorded in the Official Records of the Los Angeles County Recorder's Office on September 12, 2022. (RJN, Exhibit 5.)

            As REI was the owner of record at the time the Notice was filed, Plaintiff was required to serve the Notice on REI prior to recording the Notice. “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….” (Code Civ. Proc., § 405.23) REI has properly brought this motion to expunge on grounds that service was defective. (J & A Mash & Barrel, LLC v. Superior Court of Fresno County (2022) 74 Cal.App.5th 1, 24 [289 Cal.Rptr.3d 110, 129, 74 Cal.App.5th 1, 24].)

            Plaintiff’s argument that they have subsequently served REI and Defendant Mark Schulman with an Amended Notice of Pendency of Action cannot cure the defects in the current Notice. First, Code of Civil Procedure 405.22 clearly states that the service requirements must be met before a claimant records a notice of pendency of action. Plaintiff has already recorded the Notice and subsequent service does not comply with the statutory requirements. Second, serving REI and Defendant Mark Schulman with an Amended Notice of Pendency of Action that is not currently on file with the Los Angeles County Recorder's Office does not solve the defects. Plaintiffs do not allege that they have recorded the Amended Notice of Pendency of Action, nor have they alleged they withdrew the defective Notice currently recorded.

            Without reaching the parties additional arguments, the Notice is void and invalid due to improper service. The request to expunge the notice is GRANTED.

B.     Attorney’s fees and costs.

            Under Code of Civil Procedure section 405.38, “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.” (Code Civ. Proc., § 405.38.) The Court of Appeals has instructed that the attorney’s fees and costs must be awarded against the party, not the attorney. (Doyle v. Superior Court (1991) 226 Cal.App.3d 1355, 1359 [277 Cal.Rptr. 630, 632], modified (Feb. 1, 1991).)

            The Court finds it unjust to award sanctions against Plaintiff personally. As discussed by the Court of Appeals, the purpose of awarding attorney’s fees and costs is to curtail the misuse of the lis pendens procedure. (J & A Mash & Barrel, LLC v. Superior Court of Fresno County, supra, 74 Cal.App.5th at p. 42.) Here, Plaintiff was required to file a lis pendens because the FAC brings a cause of action for quiet title. (Code Civ. Proc., § 761.010.) The Notice is void for improper service and Plaintiff’s attorney, Michael Okayo, declares responsibility for serving the Notice. (Decl. of Michael Okayo attached to Opposition, ¶ 5.) The Court finds it unjust to award attorney’s fees and costs against Plaintiff personally when Plaintiff was required to file a lis pendens to bring a quiet title action and Plaintiff’s attorney caused such Notice to be improperly served.

            The request for attorney’s fees and costs is DENIED.

VI.       CONCLUSION

             This Motion to Expunge Lis Pendens is GRANTED. The request by REI for an award of attorney’s fees and costs is DENIED.

Dated: March 16, 2023                                               __________________________________

                                                                                                Judge of the Superior Court