Judge: Michelle Williams Court, Case: 20STCV17442, Date: 2022-08-19 Tentative Ruling

Counsel may submit on the tentative ruling by emailing Dept. 74 before 8:30 the morning of the hearing. The email address is smcdept74@lacourt.org. Please do not call the court to submit on the tentative.

IF THE DEPARTMENT DOES NOT RECEIVE AN EMAIL INDICATING THE PARTIES ARE SUBMITTING ON THE TENTATIVE RULING AND THERE ARE NO APPEARANCES AT THE HEARING, THE MOTION WILL BE PLACED OFF CALENDAR.

If you decide not to submit on the tentative ruling, REMOTE APPEARANCES ARE AUTHORIZED AND STRONGLY ENCOURAGED.  Please visit the court’s Here for You | Safe for You News Center for the latest orders governing court business.  http://www.lacourt.org/newsmedia/ui/HfySfy.aspx
    
In deciding whether to submit on the tentative ruling or attend the hearing and present oral argument, please keep the following in mind: The tentative rulings authored by this court reflect that the court has read and considered all pleadings and evidence timely submitted to the court in connection with the motion, opposition, and reply (if any). Because the pleadings were filed, they are part of the public record. Oral argument is not an opportunity to simply repeat that which a party set forth in its pleadings. Nor, is oral argument an opportunity to "make a record" when there is no court reporter present and the statements and arguments of counsel are already part of the record because they were set forth in the pleadings. Finally, simply because a party or attorney disagrees with the court's analysis and ruling or is not satisfied with it does not necessarily warrant oral argument when no new arguments will be articulated. If you submit on the tentative, you must immediately notify all other parties email that you will not appear at the hearing. If you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the motions. If all parties to the motion submit, this tentative ruling will become the final ruling after the hearing date and it will be memorialized in a minute order. This tentative ruling is not an invitation, nor an opportunity, to file further documents relative to the hearing in question. No such document will be considered by the Court.


 


 

Case Number: 20STCV17442    Hearing Date: August 19, 2022    Dept: 74

20STCV17442           CHICAGO TITLE INSURANCE COMPANY vs NEIL STILLER

Plaintiff’s Motion for Summary Judgment, or in the Alternative, Summary Adjudication of Issues as to the First and Second Causes of Action of First Amended Complaint

TENTATIVE RULING:  Plaintiff’s Motion for Summary Judgment, or in the Alternative, Summary Adjudication of Issues as to the First and Second Causes of Action of First Amended Complaint is DENIED in its entirety.

Background

On May 7, 2020, Plaintiff Chicago Title Insurance Company filed this action against Defendants Neil Stiller and Kimberly Stiller. The First Amended Complaint asserts causes of action for: (1) breach of implied warranty/covenant of title; and (2) quasi-contract based upon restitution and unjust enrichment. The FAC alleges Defendants failed to disclose the existence of a HELOC Deed of Trust encumbering real property located at 39715 Bouquet Canyon Road, Santa Clarita, California 91390 when they sold the property to A & L Investment Group, LLC, Plaintiff’s insured. A & L Investment Group sued Defendants in Los Angeles Superior Court Case BC713323, which resulted in a stipulated judgment and Plaintiff, as the insurer, paid $130,000.00 to settle with the lender and release the HELOC DOT.

Motion

On May 19, 2022, Plaintiff Chicago Title Insurance filed its motion for summary judgment, or in the alternative, summary adjudication arguing there are no triable issues of fact that it is entitled to a monetary judgment in its favor.

Opposition

In opposition, Defendants contend their stipulated judgment with Plaintiff’s insured bars this action, the rescission was null and void in violation of the statute of frauds, any action based upon the erroneous reconveyance is barred by the statute of limitations, and there are triable issues of fact precluding summary judgment or adjudication.

As part of its reply, Plaintiff contends Defendants’ opposition is 26 pages in length and therefore exceeds the page limit imposed by California Rules of Court, rule 3.1113(d): “[i]n a summary judgment or summary adjudication motion, no opening or responding memorandum may exceed 20 pages.” Plaintiff’s page-count is not correct. “The page limit does not include the caption page, the notice of motion and motion, exhibits, declarations, attachments, the table of contents, the table of authorities, or the proof of service. (Cal. R. Ct., rule 3.1113(d).)

However, Defendants’ memorandum is 21 pages and therefore exceeds the permissible limit by one page. The twenty-first page contains a single concluding sentence and counsel’s signature. Accordingly, Plaintiff is not prejudiced by the over-sized memorandum and Plaintiff’s request that the Court disregard the opposition in its entirety is DENIED. The Court expects Defendants to comply with the California Rules of Court in all future filings.

Reply

In reply, Plaintiff reiterates its arguments from its moving papers and contends Defendants failed to raise a triable issue of fact.

Defendants’ Evidentiary Objections in Opposition

Defendants’ evidentiary objections do not “[q]uote or set forth the objectionable statement or material” and therefore fail to comply with the formatting requirements of California Rules of Court, rule 3.1354(b)(3). Additionally, Defendants impermissibly restate their objections in the separate statement. (Cal. R. Ct., rule 3.1354(b) (“Objections to specific evidence must be referenced by the objection number in the right column of a separate statement in opposition or reply to a motion, but the objections must not be restated or reargued in the separate statement.”).) Finally, Defendants’ objections, while containing a space for a ruling, do not “include a place for the signature of the judge” as required. (Cal. R. Ct., rule 3.1354(c).)

Objections Nos. 1-5 are OVERRULED.

Objection No. 9 and 10 are SUSTAINED.

The remaining objections are immaterial to the Court’s disposition of the motion. (Code Civ. Proc. § 437c(q).)

Plaintiff’s Evidentiary Objections in Reply

Plaintiff’s evidentiary objections also do not comply with the formatting requirements of California Rules of Court, rule 3.1354(c): “[t]he proposed order must include places for the court to indicate whether it has sustained or overruled each objection.”

Plaintiff’s objections to the declarations of Kimberly Stiller and Neil Stiller are identically numbered and address the same substantive averments. Accordingly, the following rulings apply to Plaintiff’s objections to both declarations.

Objections Nos. 7, 8, 11-12, 14, and 16 are OVERRULED.

Objection No. 9 is SUSTAINED as to the legal conclusion “fully, and legally, reconveyed.”

Objection No. 13 is SUSTAINED as to the sentence beginning “However, the reason . . .”

The remaining objections are immaterial to the Court’s disposition of the motion. (Code Civ. Proc. § 437c(q).)

Plaintiff also filed a document entitled “Evidentiary Objections to the Memorandum of Points and Authorities in Support of Opposition to Motion for Summary Judgment, or in the Alternative, for Summary Adjudication of Issues” containing a single objection to the “Complaint filed by A & L Investment Group, LLC v. Defendants, Case No.BC73323 on July 9, 2018.” This objection is OVERRULED.

Request for Judicial Notice

Plaintiff requests the Court take judicial notice of various recorded documents as well as documents filed in Los Angeles Superior Court case BC713323. In opposition, Defendants unnecessarily request the Court take judicial notice of the First Amended Complaint in this action. Courts may take judicial notice of the existence of recorded deeds and their legal effect, but not the hearsay or disputable facts asserted in them. (Poseidon v. Woodland (2007) 152 Cal.App.4th 1106, 1117 (“For example, the First Substitution recites that Shanley “is the present holder of beneficial interest under said Deed of Trust.” By taking judicial notice of the First Substitution, the court does not take judicial notice of this fact, because it is hearsay and it cannot be considered not reasonably subject to dispute.”).) Similarly, the Court may take judicial notice of the existence and legal effect of court documents, but not the truth of the matters asserted therein. (See Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882.) Subject to these limitations, the parties’ requests for judicial notice are GRANTED.

Motion for Summary Judgment or Adjudication

Standard

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial.¿(Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) In analyzing such motions, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.”¿(Hinesley¿v.¿Oakshade¿Town Center¿(2005) 135 Cal.App.4th 289, 294.)¿Thus, summary judgment or summary adjudication is granted when, after the Court’s consideration of the evidence set forth in the papers and all reasonable inferences accordingly, no triable issues of fact exist and the moving party is entitled to judgment as a matter of law.¿(Code Civ. Proc. § 437c(c);¿Villa v.¿McFarren¿(1995) 35 Cal.App.4th 733, 741.) ¿ 

¿ 

Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”¿(Dore v. Arnold Worldwide, Inc.¿(2006) 39 Cal.4th 384, 389.) A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. (Code Civ. Proc. § 437c(f)(1).)

“A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action.” (Code Civ. Proc. § 437c(p)(1).) A plaintiff cannot leave the issue of damages for trial. (Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, 241.)

History of the HELOC DOT and Related Litigation

It is undisputed that on September 7, 2007, Defendants executed a Home Equity Line of Credit Revolving Loan Agreement with William Thomas that was secured by real property located at 39715 Bouquet Canyon Road, Santa Clarita, California 91390 as well as a second property in Lancaster, California. (Opp. Sep. Stmt. Facts 4-5.) This transaction resulted in the HELOC DOT at issue in this litigation.

On November 9, 2009, Thomas signed and recorded a Substitution of Trustee and Full Reconveyance of the HELOC DOT. (Def. RJN Ex. E.) On December 7, 2011, Thomas signed and later recorded a “Notice of Rescission of Substitution of Trustee and Full Reconveyance” claiming the prior reconveyance was in error. (Id. Ex. F.) The parties do not dispute that Defendants conveyed the property to A & L Investment Group, LLC on October 11, 2017. (Opp. Sep. Stmt. Fact 10; Def. RJN Ex. G.) It is further undisputed that Plaintiff issued a Homeowners Policy of Title Insurance to A & L Investment Group related to the sale. (Opp. Sep. Stmt. Fact 12.)

On May 4, 2018, Thomas executed and recorded a Substitution of Trustee on May 4, 2018 thereby substituting County Records Research, Inc. (“CCR”) as the trustee for the HELOC DOT. (Def. RJN Ex. H.) On May 7, 2018, CCR executed and recorded a Notice of Default and Election to Sell under Deed of Trust regarding the HELOC DOT and the real property located at 39715 Bouquet Canyon Road, Santa Clarita, California 91390, indicating an outstanding balance of $62,208.08. (Def RJN Ex. I.)

On July 9, 2018, A & L Investment Group filed a complaint against Thomas, CCR, and Defendants Neil Stiller and Kimberly Stiller asserting claims for: (1) quiet title; (2) declaratory relief; (3) cancellation of instrument; (4) preliminary and permanent injunction; (5) equitable accounting; and (6) quiet title in Los Angeles Superior Court case No. BC713323. (Def. RJN. Ex. J.) Plaintiff filed this prior action on behalf of A & L. (Peitz Decl. ¶ 18.)

On October 17, 2018, the court in BC713323 entered the Stipulation of Plaintiff A & L Investment Group, LLC and Defendants Neil Stiller and Kimberly Stiller for Entry of Judgment; Judgment. (Def. RJN Ex. K.) The stipulated judgment provided “[a]s of December 21, 2011, the date of recording of the Notice of Rescission in the Los Angeles County Recorder’s Office as Document #20111737481, that the Notice of Rescission is null and void.” (Ibid.)

On April 4, 2019, Plaintiff Chicago Title Insurance Company paid $130,000.00 to Daniel A. Nassie, Thomas’ counsel in BC713323, pursuant to “the Settlement Agreement and Release reached with Company” related to the Bouquet Canyon property. (Peitz Decl. Ex. 18.)

Plaintiff’s Claims are Based upon Subrogation

Plaintiff asserts the claims in this action based upon subrogation arising from the Homeowner’s Policy of Title Insurance between Plaintiff and A & L Investment Group. (FAC ¶ 34; Peitz Decl. Ex. 13.)

“Subrogation places the insurer in the shoes of its insured to the extent of its payment. When standing in the insured's shoes, the insurer has no greater rights than the insured would have, and for that reason is subject to the same defenses assertable against the insured.” (State Farm General Ins. Co. v. Wells Fargo Bank, N.A. (2006) 143 Cal.App.4th 1098, 1106 (citations omitted). See also Allstate Ins. Co. v. Mel Rapton, Inc. (2000) 77 Cal.App.4th 901, 908 (“Pursuant to the subrogation doctrine, when an insurer has paid an insured the amount of a loss caused by a third party, the insurer may step into the shoes of the insured and pursue the insured's rights and remedies against the third party tortfeasor.”).)

Breach of Implied Warranty/Covenant of Title - First Cause of Action

Pursuant to Civil Code section 1113, “[f]rom the use of the word ‘grant’ in any conveyance by which an estate of inheritance or fee simple is to be passed, the following covenants, and none other, on the part of the grantor for himself and his heirs to the grantee, his heirs, and assigns, are implied, unless restrained by express terms contained in such conveyance: 1. That previous to the time of the execution of such conveyance, the grantor has not conveyed the same estate, or any right, title, or interest therein, to any person other than the grantee; 2. That such estate is at the time of the execution of such conveyance free from encumbrances done, made, or suffered by the grantor, or any person claiming under him.” “A trust deed is construed as an ‘encumbrance’ and not a transfer of an interest in the fee.” (Babb v. Weemer (1964) 225 Cal.App.2d 546, 551.) “If the encumbrance is one affecting title the covenant against encumbrances is broken at the time of the transfer and the vendor's prior knowledge or notice of the encumbrance is immaterial.” (Evans v. Faught (1965) 231 Cal.App.2d 698, 709.)

Plaintiff contends it has satisfied the elements of its first cause of action because the HELOC DOT remained an encumbrance on the property at the time of sale as a result of Thomas’ Notice of Rescission, was unpaid at the time of sale, and Plaintiff paid $130,000.00 to settle its insured’s lawsuit and obtain another reconveyance from Thomas.

Thomas attests he “erroneously” stated in the 2009 Substitution of Trustee and Full Reconveyance that the HELOC DOT was fully paid and satisfied and his intention was “to reconvey the HELOC DOT with respect to the Lancaster Property only.” (Thomas Decl. ¶¶ 3-4.) Thomas further states “Defendants had requested that [he] release the HELOC DOT as to the Lancaster Property to facilitate their short sale of that property in 2009.” (Id. ¶ 4.) Thomas attests once he realized his error “on or about November 7, 2011, [he] executed, with the Defendants’ consent, a Notice of Rescission of Substitution of Trustee and Full Reconveyance.” (Id. ¶ 6.) In reply, Plaintiff cites Dreifus v. Marx (1940) 40 Cal.App.2d 461, which found a notice of rescission fell within the statute permitting “any instrument ... affecting the title to or possession of real property, may be recorded under this chapter.” (Id. at 466.) However, Dreifus involved whether a lender accepting a deed of trust was on constructive notice of a potential defect in title, such that its deed of trust could be cancelled by the defrauded owner. The Dreifus case does not aid Plaintiff here.

In opposition, Defendants raise a triable issue of fact as to whether the HELOC DOT was reconveyed and therefore could not serve as a basis for the breach of warranty claim. Defendants contend they did not consent to the execution and recording of the Notice of Rescission. (K. Stiller Decl. ¶ 19; N. Stiller Decl. ¶ 19.) There was no equity in either property that secured the HELOC DOT and when they first learned of the full reconveyance in 2011 “it made sense that Mr. Thomas released both properties in the Reconveyance due to the sweat equity which we had performed for him, the other loans which we had successfully completed with him, and the fact that there was no equity in the Santa Clarita Property because of the IRS liens.” (K. Stiller Decl. ¶¶ 13, 16; N. Stiller ¶¶ 13, 16.) In November 2011, Defendants informed Thomas that the mortgage company in first position “had agreed to remove $226,169.73 in principle from their mortgage on the Santa Clarita property,” and Thomas immediately began pressuring Defendants “to sign a new promissory note and deed of trust on the Santa Clarita Property.” (K. Stiller Decl. ¶¶ 17-18; N. Stiller ¶¶ 17-18.) Additionally, Plaintiff’s insured stipulated to that the rescission document was invalid, null and void. (Def. RJN Ex. K ¶¶ 8, 14.) Accordingly, there is a triable issue of fact as to whether the original full reconveyance was recorded as a mistake and properly rescinded, such that there was an existing encumbrance on the property at the time of sale in violation of the implied warranties and covenants of title.

As argued by Defendants, “Plaintiff provided no breakdown of the $130,000 it paid to Mr. Thomas as a settlement.” (Opp. at 25:22-23.)  Plaintiff therefore failed to meet its initial burden on this issue, which is also fatal to its motion. (See e.g. American Title Co. v. Anderson (1975) 52 Cal.App.3d 255, 260 (“The amount of the judgment to which American would be entitled on subrogation would be limited to the amount which the Binns could have recovered had they proceeded directly against the defendants. In settling with the Binns for any greater amount, American would be a volunteer. . . . When indemnification is sought on the basis of a settlement effected with the creditor the question of liability and the limit thereof are still open factual questions. . . . American's declaration, while adequate in all other respects, does not with sufficient particularity set forth the basis of its settlement with Binns, so as to fix the amount of damages to be awarded on its action in subrogation.”).)

Summary adjudication is DENIED as to the first cause of action.

Quasi Contract - Second Cause of Action

The court in Welborne v. Ryman-Carroll Foundation (2018) 22 Cal.App.5th 719 summarized the relevant legal principles of quasi-contract:

A cause of action for quasi-contract invokes consideration of equitable principles, rather than of contract. It is an obligation created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to its former position by return of the thing or its equivalent in money. The doctrine focuses on equitable principles; its key phrase is ‘unjust enrichment,’ which is used to identify the transfer of money or other valuable assets to an individual or a company that is not entitled to them. In applying the principles of unjust enrichment, we do so to determine whether a plaintiff is entitled to restitution of the amount at issue. An individual is required to make restitution if he or she is unjustly enriched at the expense of another. A person is enriched if the person receives a benefit at another's expense. The fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.

(Welborne, supra, 22 Cal.App.5th at 725 (citations and quotations omitted).) Plaintiff’s quasi contract claim is based upon the many of the same facts as the first cause of action. (Mot. at 10:22-15:11.) As noted above, there are triable issues of fact as to whether the HELOC DOT remained on the property and Plaintiff failed to adequately demonstrate its claimed damages. Defendants note Thomas had not attempted to collect on the HELOC “from 2012 and on.” (N. Stiller Decl. ¶ 21; K. Stiller Decl. ¶ 21.) If Defendants are incorrect in their stated belief that the debt was extinguished, rather than merely unsecured, their unjust enrichment would be limited to the amount owed under the HELOC agreement. (See e.g. Katsivalis v. Serrano Reconveyance Co. (1977) 70 Cal.App.3d 200, 210 (“Any unjust enrichment should be measured by the benefits to the widow, not the amount expended by the creditor on her behalf.”).)

Summary adjudication is DENIED as to the second cause of action.

Preclusion 

“Although the insurer may bring a separate action against the tortfeasor, the rule against splitting a cause of action is violated where both the insurer and insured pursue separate actions. [Citations] This is so because the general rule of subrogation provides that an insurer stands in the shoes of its insured; if a second action by the insured is barred, so is the action by the insurer.” (Allstate Ins. Co. v. Mel Rapton, Inc. (2000) 77 Cal.App.4th 901, 908.)

In its motion, Plaintiff anticipated Defendants’ arguments regarding res judicata and claims splitting. (Mot. at 15:15-19:6.) Plaintiff contends this case is an exception to the doctrine against claim splitting and Defendants have waived the defense of claim splitting.

Considering the Court’s findings above, Plaintiff’s motion is properly denied whether or not Defendants’ defense is valid. As to Plaintiff’s waiver argument, Plaintiff appears to concede triable issues exist. (Mot. at 18:19-22 (“More importantly, the waiver of a legal right is an intensely factual determination. [Citation]. Plaintiff submits that whether this language in the Stipulation constitutes a waiver of the doctrine of claim splitting is a question of fact for the trier of fact in this case.”).)

It is not clear that the settlement necessarily bars this action. “[W]hile a stipulated judgment normally concludes all matters put into issue by the pleadings, the parties can agree to restrict its scope by expressly withdrawing an issue from the consent judgment.” (Ellena v. State of California (1977) 69 Cal.App.3d 245, 260.) The stipulated judgment in this action provided “[t]his judgment is not a complete resolution of all rights and obligations towards one another, but is only a resolution of the Parties’ claims brought before the Court in the instant action.” (Def. RJN Ex. K ¶ 15.) One possible interpretation of this provision would preclude the expansive, typical application of res judicata urged by Defendants that it applies to all claims that could have been raised. (Opp. at 17:9-18:27.) Additionally, Plaintiff’s quasi contract claim arose after entry of the stipulated judgment.

However, issue preclusion may bar Plaintiff’s first cause of action, as its insured expressly stipulated the rescission, which Plaintiff’s rely upon to support their claim, was null and void. (See e.g. California State Auto. Assn. Inter-Ins. Bureau v. Superior Court (1990) 50 Cal.3d 658, 664; Reply at 7:14-16 (“As a result of the Notice of Rescission, the HELOC DOT remained on the Property as a senior encumbrance after its Property after October, 2017 when they conveyed the Property to Plaintiff’s Insured.”).)

Statute of Frauds and Statute of Limitations

In opposition, Defendants also contend the rescission violates the statute of frauds. (Opp. at 23:10-23.) Pursuant to Civil Code section 1624(a)(3), “[a]n agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; such an agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent is in writing, subscribed by the party sought to be charged.” The notice of rescission is not signed by Defendants, the parties to be charged, and purported to have the effect of reimposing a deed of trust upon the property after Thomas’ reconveyance. Deeds of trust and modifications thereto are subject to the statute of frauds. (See e.g. Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 552-553 (“A mortgage or deed of trust also comes within the statute of frauds. . . . An agreement to modify a contract that is subject to the statute of frauds is also subject to the statute of frauds.”).) Accordingly, the statute of frauds would appear to bar Plaintiff’s first cause of action as it is dependent upon the validity of the rescission. Plaintiff does not address the statute of frauds in reply.

Defendants also contend any claim Thomas had based upon the alleged erroneous reconveyance would be barred by the statute of limitations. (Opp. at 23:24-24:10.) However, Defendants do not provide sufficient authority to demonstrate the legal significance of this fact to the claims asserted by Plaintiff in this action.