Judge: George F. Bird, Jr., Case: 22CMCV00406, Date: 2023-03-23 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: 22CMCV00406    Hearing Date: March 23, 2023    Dept: B

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES – SOUTH CENTRAL DISTRICT

I.       BACKGROUND

            Plaintiffs Lawrence Ramsey and Tommy Ramsey (“Plaintiffs”) filed the Complaint in this action on October 20, 2022. Plaintiffs filed the operative First Amended Complaint (“FAC”) on January 12, 2023. Plaintiffs allege they were approached by Defendant Jarrell Davis, on behalf of himself, The Pathway Group (“PWG”), and several other entities, proposing a join venture in which Plaintiffs would provide a property located at 15323 South White Avenue, Compton, CA 90221 (the “Property”) and PWG would provide $2,000,000.00 to develop the Property. (FAC, ¶¶ 29, 30, 31, 32, 34(a), 34(c).) Plaintiffs allege that Plaintiff Lawrence Ramsey transferred the Property to the joint venture for convenience of the development project, but Defendant Jarrell Davis began fraudulently transferring and incumbering the Property without the knowledge or approval of Plaintiffs. (FAC, ¶¶ 36, 37, 38-61.)

            On or around June 13, 2019, Plaintiffs allege that Defendant Jarrell Davis, by forging the signature of Cedric L. Price, use the Property to secure a $655,000.00 loan from Defendant The Owners Escrow which listed James Russell, Grant Whitcher, Julie Russell, and George P. Mulopulos (“Defendants”) as beneficiaries. On December 21, 2021, The Owners Escrow loan defaulted. (FAC, ¶ 61.) In lieu of foreclosure, Defendant Jarrell Davis allegedly again forged the signature of Cedric L. Price and recorded a deed giving the Property to Defendants. (Ibid.)

            Plaintiffs now bring 11 causes of action against several defendants, including two causes of action against Defendants for (1) quiet title and (2) declaratory relief. Plaintiffs seek a declaration that any deed of trust recorded after April 5, 2017 is invalidated.

II.       DEMURRER

A.    Demurrer filed February 14, 2023.

             Defendants demur to the causes of action for quiet title and declaratory relief on three basis. First, Defendants argue that the statute of limitations has run. Defendants argue that the causes of action accrued in 2017, that the applicable three-year statute of limitations expired in 2020, and that Plaintiffs do not plead facts sufficient to satisfy the delayed discovery rule. Second, Defendants argue that any claims to the Property by Tommy Ramsey fail because Plaintiffs do not allege that Tommy Ramsey has an interest in the Property. Finally, Defendants argue that they have bona fide encumbrances which prevent Plaintiffs from attempting to quiet title or obtain declaratory relief.

B.     Opposition filed March 8, 2023.

            Plaintiffs argue that the FAC alleges sufficient facts to support the use of the delayed discovery rule until Plaintiffs discovered the fraudulent transfers in 2022. Plaintiffs also argue that Defendants cannot be bona fide encumbrancers because they had constructive notice of the fraudulent nature of the transfer of the Property due to the 10 suspicious transfers recorded within the last five years. Plaintiffs finally argue that Defendants status as bona fide encumbrancers is irrelevant because the deed through which Defendants obtained the Property was forged and therefore void.

C.     Reply filed March 16, 2023.

            Defendants continue to argue that Plaintiffs have failed to allege sufficient facts to support the delayed discovery rule. Defendants argue that they had no actual or constructive notice of Plaintiffs claim and that they satisfied their burden by performing a title search before encumbering the Property. Defendants also argue that Plaintiffs lack standing to assert that Defendants obtained title through a void deed because Plaintiffs transferred their interest two years before the allegedly void transfer to Defendants.

III.       LEGAL STANDARDS

            A demurrer tests the legal sufficiency of the factual allegations in the complaint. (K.G. v. S.B. (2020) 46 Cal.App.5th 625, 630.) “The purpose of a demurrer is to test whether, as a matter of law, the properly pleaded facts in the complaint state a cause of action under any legal theory.” (Olson v. Hornbrook Community Services Dist. (2019) 33 Cal.App.5th 502, 516.) In ruling on a demurrer, the court must “liberally construe[]” the allegations of the complaint in favor of plaintiff. (Code Civ. Proc., § 452; See Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)  

            The court must assume the truth of (1) the properly pleaded factual allegations; (2) facts that can be reasonably inferred from those expressly pleaded; and (3) judicially noticed matters. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; McBride v. Smith (2018) 18 Cal.App.5th 1160, 1173.) “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions, or conclusions of fact or law.” (Savea v. YRC Inc. (2019) 34 Cal.App.5th 173, 178; See also Moore v. Conliffe (1994) 7 Cal.App.4th 634, 638.) For a statutory violation, “facts in support of each of the requirements of a statute” must be “specifically pled,” and simply “parroting the language” of a statute is insufficient to survive a demurrer. (Hawkins v. TACA Internat. Airlines, S.A. (2014) 223 Cal.App.4th 466, 477-478.) 

            Because a demurrer tests the legal sufficiency of a pleading, the plaintiff must show that the pleading alleges facts sufficient to establish every element of each cause of action. (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.) Sufficient facts are the essential facts of the case “with reasonable precision and with particularity sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643-644.) Where the pleading fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer. (Code Civ. Proc., § 430.10, subd. (e); Zelig v. County of Los Angeles (2002) 27 Cal.App.4th 1112, 1126.)

            “Where the complaint's allegations or judicially noticeable facts reveal the existence of an affirmative defense, the ‘plaintiff must “plead around” the defense, by alleging specific facts that would avoid the apparent defense. Absent such allegations, the complaint is subject to demurrer for failure to state a cause of action ....’ [Citations.]” (Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 824 [121 Cal.Rptr.2d 703, 710].)

IV.       DISCUSSION

A.    Claims by Tommy Ramsey.

            Plaintiffs allege that Plaintiff Lawrence Ramsey was the legal and equitable title holder of the Property before he was fraudulently induced by Defendant Jarrell Davis to transfer the Property to a joint venture. (FAC, ¶ 143.) Plaintiffs do not allege that Plaintiff Tommy Ramsey has any interest in the title to the Property. In the Opposition, Plaintiffs state that Plaintiff Tommy Ramsey is not making a claim for title to the Property. (Opposition, p. 2:20-22.) Because a quiet title cause of action requires an alleged interest in the Property, the Demurrer is SUSTAINED as to the quiet title and declaratory relief causes of action brought by Tommy Ramsey. Because Plaintiffs do not seek to amend, leave to amend will not be granted.

B.     Quiet title cause of action.

            “A quiet title action is a statutory action that seeks to declare the rights of the parties in realty.” (Internal quotations omitted.) (Weeden v. Hoffman (2021) 70 Cal.App.5th 269, 291 [285 Cal.Rptr.3d 262, 278, 70 Cal.App.5th 269, 291].) A complaint that brings a cause of action to quiet title must include: (1) A description of the property that is the subject of the action; (2) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title; (3) The adverse claims to the title of the plaintiff against which a determination is sought; (4) The date as of which the determination is sought; and (5) A prayer for the determination of the title of the plaintiff against the adverse claims. (Code Civ. Proc., § 761.020.)

            Here Plaintiffs offer the location of the Property by providing the address and parcel number. (FAC, ¶ 29.) Plaintiffs allege that Lawrence Ramsey was legal and equitable owner of the Property before being fraudulently induced by Jarrell Davis to transfer his interest in the Property to a joint venture. (FAC, ¶ 143.) Plaintiffs identify each adverse claim and provide extensive allegations related to the several transfers of the Property between 2017 and 2022. (FAC, ¶¶ 38-61.) Plaintiffs request a declaration that the title to the Property is vested in Lawrence Ramsey and a determination that all grant deeds recorded after April 5, 2017 are invalidated. (FAC, ¶¶ 145, 148.) Plaintiffs have properly alleged the necessary elements of a quiet title cause of action.

C.     Statute of limitations.

            “Where a demurrer raises the bar of the applicable statute of limitations, the court assesses whether ‘ “the complaint shows on its face that the statute bars the action.” ‘ (E–Fab, Inc., supra, 153 Cal.App.4th 1308, 1315, 64 Cal.Rptr.3d 9.) Such a defect ‘ “must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.” [Citations.]’ (Id. at p. 1316, 64 Cal.Rptr.3d 9.)” (Czajkowski v. Haskell & White, LLP (2012) 208 Cal.App.4th 166, 174 [144 Cal.Rptr.3d 522, 528].)

            “The Legislature has not established a specific statute of limitations for actions to quiet title. (Muktarian v. Barmby (1965) 63 Cal.2d 558, 560, 47 Cal.Rptr. 483, 407 P.2d 659 (Muktarian ).) Therefore, courts refer to the underlying theory of relief to determine the applicable period of limitations. (Ibid.; see 53 Cal.Jur.3d (2012) Quieting Title, § 34, pp. 412-413.)” (Salazar v. Thomas (2015) 236 Cal.App.4th 467, 476 [186 Cal.Rptr.3d 689, 694–695], as modified on denial of reh'g (May 28, 2015).) The parties do not dispute that the applicable statute of limitations is a three-year statute of limitations for actions on grounds of fraud or mistake. (Code Civ. Proc., § 338, subd. (d).) Causes of action will not accrue, and the statute of limitations will not begin to run, “until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Ibid.)

            Here, Plaintiffs allege that they did not discover the allegedly fraudulent transfers until August of 2022 when Plaintiffs discovered the defaulted loan. (FAC, ¶ 65.) Plaintiffs allege that they had no reason to think they had been defrauded because Plaintiffs continued to ask Defendant Jarrell Davis why the project was taking so long, and Defendant Jarrell Davis would provide valid reasons. (Ibid.) Taking these allegations as true, as is required when assessing a demurrer, Plaintiffs’ claims did not accrue until August of 2022. (See McBride v. Smith, supra, 18 Cal.App.5th at p. 1173.)

            Defendants argue that Plaintiffs clearly allege that the first fraudulent transfer was “on or around April 6, 2017,” when Plaintiff Lawrence Ramsey transferred the Property to the joint venture based on allegedly fraudulent representations by Defendant Jarrell Davis. (FAC, ¶ 36.) Defendants argue that the causes of action for quiet title and declaratory relief accrued on this date and the statute of limitations began to run.

            Code of Civil Procedure section 338, subdivision (d), is clear that a cause of action for fraud does not accrue until discovery of the facts constituting fraud. The date of the alleged fraud is irrelevant for determining the statute of limitations. Defendants also argue that several factors should have alerted Plaintiffs to the fraud sooner, but these alternative factual allegations are not a proper consideration on a demurrer. The face of the FAC pleads that the facts of the fraud were discovered in August of 2022 and Plaintiffs commenced this action on October 20, 2022. Based on these allegations, this action is timely.

            Defendants fail to demonstrate that a statute of limitations defense is clearly present on the face of Plaintiffs’ FAC.

D.    Bona fide encumbrances.

            Defendants also argue that Plaintiffs’ claims fail because Defendants are bona fide encumbrancers. Two elements establish a party as a bona fide encumbrancer: (1) encumbrance of the property in good faith for value, (2) without knowledge or notice of the asserted rights of another. (First Fidelity Thirty & Loan Ass'n v. Alliance Bank (1998) 60 Cal.App.4th 1433, 1440-1441.) The FAC alleges that Defendants provided a $655,000.00 loan for a secured interest in the Property. (FAC, ¶ 75.) Plaintiffs allege that Defendants had notice of the rights of another because a simple title search would have shown 10 suspicious transfers from other lenders. (Ibid.) Defendants argue that Plaintiffs particular interest was not discoverable upon a search of the record and thus Defendants are bona fide encumbrancers.

            “[B]ona fide purchasers and mortgagees who are about to invest money on the faith of title, should be held to have satisfied the demands of reasonable diligence, when they find an unincumbered [sic] record.” (Brock v. First South Savings Assn. (1992) 8 Cal.App.4th 661, 673 [10 Cal.Rptr.2d 700].) Here, Plaintiffs do not allege that the record shows that the Property was encumbered by Plaintiffs’ interest. Rather Plaintiffs allege that if Defendants “looked into any one of the other loans” they would have discovered the fraud. (FAC, ¶ 75.) This is not the standard for reasonable diligence. Defendants met the standard of diligence to be a bona fide encumbrancer.

            Plaintiffs argue that Defendants status as a bona fide encumbrancer is irrelevant as the deed obtained by Defendants is void. A bona fide encumbrancer takes title free and clear “so long as the reconveyance is voidable and not void.” (Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 376 [100 Cal.Rptr.2d 801, 802].) “A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing.” (Schiavon v. Arnaudo Brothers, supra, 84 Cal.App.4th at p. 378.)

            Here, Plaintiffs clearly allege that Jarrell Davis forged the signature of Cedric Price on several deeds of trust including the deed of trust to Defendants. (FAC, ¶¶ 57, 70.) “Since a trust deed obtained by means of forgery is void, it follows that any claim of title flowing from such a deed is void. This elementary legal principle makes clear the validity of the title of a subsequent purchaser or encumbrancer depends upon the validity of his grantor's title.” (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 44 [198 Cal.Rptr. 418].) Based on the allegations in the FAC, Defendants obtained title from a void transfer and thus their status as a bona fide encumbrancer is irrelevant. Plaintiffs allege they are the ultimate holder of the title to the Property and that every subsequent transfer after April 5, 2017, is invalid or void, thus Plaintiffs have standing to attempt to recoup the Property.

            Based on the foregoing, Defendants have failed to demonstrate that their status as bona fide encumbrancers prevent Plaintiffs from pursuing causes of action for quiet title and declaratory relief.

V.       CONCLUSION

            This Demurrer to SUSTAINED, without leave to amend, as to the causes of action for quiet title and declaratory relief brought by Tommy Ramsey.

            This Demurrer is OVERRULED as to the causes of action for quiet title and declaratory relief brought by Lawrence Ramsey.

Dated: March 23, 2023                                               _________________________________

                                                                                                Judge of the Superior Court