Judge Lee W. Tsao, Case Number: 22NWCV01522, Date: 2023-08-22 Tentative Ruling

Judge: Lee W. Tsao, Case: 22NWCV01522, Date: 2023-08-22 Tentative Ruling

Case Number: 22NWCV01522 Hearing Date: March 21, 2024 Dept: C

THEE AGUILA, INC. v. PICO RIVERA FIRST MORTGAGE INVESTORS, LP

CASE NO.: 22NWCV01522

HEARING: 03/21/24

Defendants’ PICO RIVERA FIRST MORTGAGE INVESTORS, LP and MORTGAGE CO. OF SANTA BARBARA, INC.’s Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED with 15 days leave to amend.

Moving Party(s) to give notice.

Defendants’ Request for Judicial Notice is GRANTED. (Cal. Ev. Code §452.)

This action for quiet title was filed by Plaintiff THEE AGUILA, INC. (“TAI” or “Plaintiff”) on December 7, 2022. On August 8, 2023, the operative First Amended Complaint (“FAC”) was filed.

The FAC alleges, in pertinent part: “Commencing in 2002, TAI became the fee simple owner of commercial real estate located at 8825 Washington Blvd., Pico Rivera, California 90660….The Property consisted of a 34,000 square foot building used as a nightclub, restaurant and banquet venue.” (FAC ¶13.) “On or about July 16, 2015, TAI borrowed $5,700,000 from PRFMI (the ‘Loan’) which was secured by the Property pursuant to a Deed of Trust from TAI….” (FAC ¶14.) “TAI defaulted on the Loan and PRFMI on or about December 6, 2017 attempted to conduct a trustee’s sale of the Property pursuant to its power of sale under the Deed of Trust.” (FAC ¶15.) “TAI… alleges that PRFMI dissuaded other potential bidders from bidding at the attempted trustee’s sale. This allowed PRFMI to have a winning bid by making a credit bid in the amount of $5,105,000, far less than that $13,417,000 fair market value of the Property.” (FAC ¶16.) “The Trustee’s Deed Upon Sale did not validly convey any title to the Property to PRFMI because the attempted trustee’s sale was held in violation of a bankruptcy automatic stay and was therefore void ab initio.” (FAC ¶18.) “On or about November 20, 2019, PRFMI attempted to transfer title to the Property (title which PRFMI did not possess because of the void nature of the prior attempted trustee’s sale) by delivering a deed to the Property to Mercury Bowl and Green Rivera, which they recorded. [¶] At this point in time, ownership to the Property was still retained by TAI since the attempted December 7, 2017 trustee’s sale was void and PRFMI therefore had no title to the Property to convey to Mercury Bowl and Green Rivera in November, 2019.” (FAC ¶¶24-25.) “Concerned about the void nature of the attempted trustee’s sale, and therefore the void nature of any attempted transfer of title to Mercury Bowl and Green Rivera, PRFMI, at the urging of Mercury Bowl and Green Rivera, on or about November 11, 2020 filed a motion for retroactive relief from stay in the bankruptcy case of Malley, without providing any notice of such filing or copy of such filing to TAI.” (FAC ¶27.) “[O]n or about November 15, 2020, PRFMI and TAI entered into a Settlement Agreement pursuant to which PRFMI agreed to no longer pursue the motion for retroactive relief from stay.” (FAC ¶28.) “In breach of the Settlement Agreement, PRFMI continued to pursue the motion for retroactive relief from stay after execution and delivery of the Settlement Agreement. Plaintiff… alleges that it was Mercury Bown and Green Rivera that induced and encouraged PRFMI to breach the Settlement Agreement by continuing to seek retroactive relief from stay.” (FAC ¶29.)

Plaintiff alleges that “PRFMI, Green Rivera, and Mercury Bowl are… estopped from asserting any claims to title arising from a granting of the motion for retroactive relief from stay which was pursued in violation of the Settlement Agreement. [¶] Plaintiff… seeks a declaration that is still the sole owner of the Property and that PRFMI, Green Rivera and Mercury Bowl have no right, title or interest in and to the Property.” (FAC ¶¶30-31.)

The FAC asserts the following causes of action:

(1) Quiet Title;

(2) Waste; and

(3) Wrongful Foreclosure

Defendants PICO RIVERA FIRST MORTGAGE INVESTORS, LP (“PRFMI”) generally demurs to the first cause of action for quiet title; and Defendants PRFMI and MORTGAGE CO. OF SANTA BARBARA, INC. (“Mortgage Co.”) generally demur to the third cause of action for wrongful foreclosure.

In the instant Demurrer, Moving parties indicate that TAI’s sole shareholder (Mr. Aguila” executed a Guaranty, personally guaranteeing repayment of TAI’s Loan from PRFMI. PRFMI sued Mr. Aguila on the Guaranty (Pico Rivera First Mortgage Investors v. Aguila, Santa Barbara Sup. Ct., Case No. 18CV04958). The Santa Barbara case apparently settled.

In Opposition, Plaintiff indicates that there is a pending appeal involving the parties to this action that may affect this case.

This matter was called for hearing on February 15, 2024, and this Court was initially inclined to continue this Demurrer until after the appellate court issues a ruling in the Santa Barbara action. (Court of Appeal Case No. B322020.) At the hearing, however, Plaintiff indicated that it did not oppose having the Demurrer heard before the appeal is decided. (See 02/15/24 M.O.)

The Court notes that, to date, this case has not been deemed related to any other case(s), and no Notices of Related Case have been filed in this action. The Court further notes that the Moving Parties on the Demurrer do not seek a plea in abatement or argue that the rule of exclusive concurrent jurisdiction applies.

Therefore, the Court will rule on the merits.

First Cause of Action – Quiet Title as to PRFMI

The elements of a claim for quiet title are: (1) a description of the real property; (2) title of the Plaintiff as to which determination of quiet title is sought and the basis of title; (3) adverse claims to the title; and (4) the date as of which determination is sought. (CCP §761.020.)

PRFMI argues that this cause of action is subject to demurrer against it because Plaintiff does not allege that PRFMI has an adverse claim to Plaintiff’s claim for title. This argument is well-taken. Plaintiff alleges that PRFMI transferred its void deed to the Property to Mercury Bowl and Green Rivera. (FAC ¶24.) Plaintiff does not allege that PRFMI asserts any current claim to title, or that PRFMI is the current title-holder (void or otherwise). Plaintiff instead alleges that PRFMI transferred its void deed to Mercury Bown and Green Rivera. Because Plaintiff does not allege that PRFMI is asserting an adverse claim to title, the demurrer to the first cause of action is properly sustained.

The demurrer to the first cause of action is SUSTAINED with 15 days leave to amend as to PRFMI.

Third Cause of Action – Wrongful Foreclosure as to PRFMI and Mortgage Co.

Moving Defendants argue that this claim is barred by the statute of limitations because the alleged wrongful foreclosure occurred on December 6, 2017, and this action was not filed until five years later on December 7, 2022.

In Opposition, Plaintiff argues that the statute of limitations for wrongful foreclosure is four years, and that Defendants are estopped from asserting the statute of limitations defense because PRFMI “lulled TAI into not filing the present wrongful foreclosure action” pursuant to an oral agreement. (See Opp. 9:14-22.)

“The elements of a wrongful foreclosure cause of action are: (1) [T]he trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering. [Citation Omitted.]” (Citrus El Dorado, LLC v. Chicago Title Co. (2019) 32 Cal.App.5th 943, 948.) Generally, the statute of limitation for wrongful foreclosure is three years. (CCP §338(a)(d).

A defendant may be equitably estopped to assert the statute of limitations as a defense. “Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it.” (Cal. Ev. Code §623.) “One cannot justly or equitably lull his adversary into a false sense of security, and thereby cause his adversary to subject his claim to the bar of the statute of limitation, and then be permitted to plead the very delay caused by his course of conduct as a defense to the action when brought.” (Carruth v. Fritch (1950) 36 Cal.2d 426, 433.) “To create an equitable estoppel, it is enough if the party has been induced to refrain from using such means or taking such action as lay in his power, by which he might have retrieved his position and saved himself from loss.” (Atwater Elementary School Dist. v. Cal. Dept. of Gen. Svcs. (2007) 41 Cal.4th 227, 232.) To establish equitable estoppel, a plaintiff must allege: (1) the party to be estopped knew the true facts; (2) the party made a misrepresentation, by words or conduct, bearing on the necessity of brining a timely suit; (3) the party intended its words or conduct would be acted upon, or led plaintiff to believe it was so intended; and (4) the plaintiff was ignorant of the true state of facts; and (5) the plaintiff reasonably relied in delaying commencement of the action. (Doheny Park Terrace Homeowners Ass’n Inc. v. Truck Ins. Exch. (2005) 132 Cal.App.4th 1076.)

Facts to support equitable estoppel are not sufficiently alleged in the operative pleading. In Opposition, Plaintiff concedes this issue and argues that “TAI should be granted leave to amend the FAC to include… factual allegations with regard to tolling of the statute of limitations.” (Opp. 9:28-10:1.) On this basis, the demurrer is SUSTAINED with 15 days leave to amend as to PRFMI and Mortgage Co. Determining whether or not a claim is time-barred as a matter of law is a threshold issue. Therefore, the Court declines to address the remaining arguments raised in Demurrer.