Judge Randy Rhodes, Case 21CHCV00366 2023-01-11 Tentative Ruling

MOVING PARTY: Defendant FDK International LLC, a California limited liability company; and Defendant/Cross-Complainant James He, an individual (collectively, “Moving Defendants”)

RESPONDING PARTY: Plaintiff/Cross-Defendant Guillermo Alvarado (“Plaintiff”)

RELIEF REQUESTED: An order granting summary judgment in favor of Moving Defendants and against Plaintiffs as to Plaintiff’s complaint and Defendant/Cross-Complainant James He’s cross-complaint.

Moving Defendants’ objections to Plaintiff’s Undisputed Material Fact numbers 32, 39, 41, and 42 are sustained.

Moving Defendant’s Request for Judicial Notice (RJN) is granted as to Exhibits 1–18 and 21. Defendant’s RJN is denied as to Exhibits 19–20 and 22–23.

Plaintiff is reminded to review the 5/3/19 First Amended General Order Re Mandatory Electronic Filing for Civil. When e-filing documents, parties must comply with the “TECHNICAL REQUIREMENTS” which are set forth at page 4, line 4 through page 5, line 12 of the Court’s 5/3/19 First Amended General Order Re Mandatory Electronic Filing for Civil (particularly bookmarking declarations and exhibits). (CRC 3.1110(f)(4).) Failure to comply with these requirements in the future may result in papers being rejected, matters being placed off calendar, matters being continued so documents can be resubmitted in compliance with these requirements, documents not being considered and/or the imposition of sanctions.

This dispute arises over a residence located at 16923 Royal Pines Lane, Canyon Country CA 91387. Plaintiff alleges borrowing $250,000 from defendant Victor Marquez on 10/19/15. The loan was secured by a deed of trust on the property (second position after a first deed of trust by third party Wells Fargo). On 6/15/16, Plaintiff filed for Chapter 7 Bankruptcy. On 9/13/17, while the Bankruptcy was still pending, Plaintiff executed a grant deed transferring the property to defendants Victor Marquez and David Marquez. The transfer was listed as a “bonafide gift with nothing in return.”

Plaintiff alleges the transfer was made based on a false representation by Victor Marquez regarding the necessity of this arrangement. On 10/18/17, the Bankruptcy Trustee filed a complaint against David and Victor Marquez for Avoidance of Unauthorized Post-Petition Transfer, Recovery to Avoid Transfer, and Automatic Preservation of Avoided Transfer. On 1/17/19, the Bankruptcy Court entered a default judgment on the trustee complaint, which voided the 9/13/17 dated and 12/22/17 recorded grant deed.

On 3/21/19, Plaintiff alleges Victor Marquez made a second false representation regarding the necessity of the execution of the 2017 grant deed. Plaintiff subsequently executed the new grant deed on 3/21/19, which was recorded on 4/8/19. On 9/22/20, David and Victor Marquez executed a grant deed to defendant James He, which was recorded on 9/30/20. He subsequently executed a grant deed to FDK International, LLC (“FDK”), on 9/28/20, and recorded it on 11/30/20. Prior to recording, on 10/21/20, defendant FDK filed a complaint for unlawful detainer against Plaintiff (Case No. 20CHUD0544). Plaintiff answered the unlawful detainer complaint on 11/3/20.

On 5/7/21, Plaintiff filed the instant action against defendants FDK, Victor Marquez, David Marquez, and James He, alleging the following causes of action: (1) Cancellation of Written Instruments and (2) Quiet Title as to all defendants; and (3) Fraud (Count 1) and (4) Fraud (Count 2) against Victor Marquez. On the same date, Plaintiff filed a notice of related cases with the unlawful detainer action.

On 7/16/21, the clerk entered a default against FDK. On 7/21/21, the clerk entered defaults against Victor Marquez and David Marquez. On 8/13/21, Plaintiff filed a notice of lis pendens showing a recorded lis pendens on 8/9/21.

On 8/17/21, the parties stipulated to vacate all defaults. On 8/19/21, the Court granted the motion to consolidate the unlawful detainer with the unlimited jurisdiction action. On 9/7/21, Victor Marquez answered the complaint. On 9/24/21, FDK and He answered the complaint. On the same date, FDK filed a cross-complaint against Plaintiff, and defendants David and Victor Marquez, for Declaratory Relief (first and third causes of action), and Indemnity. All parties answered the cross-complaint on 10/19, 10/22, and 10/25/21, respectively.

On 4/27/22, He filed an amended cross-complaint substituting himself for FDK. David and Victor Marquez answered on 5/5/22, and Plaintiff answered on 5/16/22.

On 10/26/22, Moving Defendants filed the instant motion for summary judgment and request for judicial notice. On 12/28/22, Plaintiff filed his opposition. On 1/6/23, Moving Defendants filed their reply.

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.) Code of Civil Procedure section 437c, subdivision (c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 65, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381–382.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519–1520.)

Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.

To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 163.) 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.)

In his first cause of action, Plaintiff seeks the cancellation of the 2017 and 2019 grant deeds.[1] Plaintiff’s second cause of action seeks to quiet title as to the subject property. Here, Moving Defendants argue that they are entitled to judgment as a matter of law as to the two causes of action against them because defendant He was a bona fide purchaser, and FDK is a transferee of said bona fide purchaser. (MSJ, 2:19–22.)

A bona fide purchaser is given priority over unrecorded interests. “Generally, to be a bona fide purchaser for value, the buyer must (1) purchase the property in good faith for value, and (2) have no knowledge or notice--actual or constructive--of the asserted rights of another. … Ordinarily, a buyer satisfying those elements ‘takes the property free of such unknown rights.’” (RNT Holdings, LLC v. United General Title Ins. Co. (2014) 230 Cal.App.4th 1289, 1296.) “A bona fide purchaser may clothe his transferee with a good title, regardless of whether the transferee had notice.” (March v. Pantaleo (1935) 4 Cal. 2d 242, 244.)

Here, Moving Defendants assert that defendant He purchased the property in exchange for $1.2 million, and without any actual nor constructive knowledge of Plaintiff’s claims to the property. (MSJ, 17:9–16.) These assertions are supported by He’s declaration, which Plaintiff does not dispute. (Pl.’s Resp. to Sep. Stmt., nos. 28–29.) Accordingly, the Court finds that moving defendant He is a bona fide purchaser for value, and thus may have priority over Plaintiff’s claims to the property, by moving defendant FDK’s claims similarly take priority by extension. (MSJ, 19:1–3.)

Moving Defendants argue that, as bona fide purchasers for value, they are entitled to take “free and clear of a voidable instrument or claim, so long as the instrument or claim is voidable, not void.” (MSJ, 17:3–5 [emphasis in original].)

An instrument is void when, for example, it is forged or “procured by fraud in the inception (as opposed to fraud in the inducement).” (People v. Schmidt (2019) 41 Cal.App.5th 1042, 1058.) A void instrument conveys no title to a grantee, whereas a voidable instrument may nevertheless convey title and be enforced by a bona fide purchaser. (Ibid. (“A fraudulently induced deed, though voidable, is nevertheless ‘genuine’ in the sense that it conveys title and can be relied upon and enforced by a bona fide purchaser.”).)

“When the grantor does not realize the nature of the instrument being executed and, because of fraud, he or she believes it to be some type of a document other than a deed, there is fraud in the inception.” (3 Cal. Real Est. § 8:54 (4th ed.).) “When the grantor is aware that the instrument is a deed, and that it will convey title, but he or she is induced to execute and deliver it by a fraudulent misrepresentation, there is merely fraud in the inducement.” (Ibid.)

Here, Moving Defendants argue that the 2019 grant deed is voidable because it was procured by fraud in the inducement, rather than void due to fraud in the inception. (MSJ 13:5–7.) According to Moving Defendants, Plaintiff “does not claim that he signed a paper that he did not know was a deed and his history of signing real estate documents demonstrates that he knows what a Deed is.” (MSJ, 12:22–23.) Moving Defendants proffer Plaintiff’s complaint and deposition testimony indicating that Plaintiff was aware that the document he signed was a deed. (MSJ, 13:1–7.)

Plaintiff’s complaint refers to the instruments at issue as the “2017 Grant Deed” and “2019 Grant Deed,” and states that “the document that Plaintiff was presented with transferred the entire Property to the Marquez Defendants, not merely a co-ownership interest to Defendant VICTOR MARQUEZ.” (Compl. ¶ 21 [emphasis in original].) In his deposition, Plaintiff stated that he signed the 2019 deed based on misrepresentations made by defendant Victor Marquez. (Ex. “B” to Decl. of David Bartelstone, 69:5–70:17.) As such, Moving Defendants have satisfied their initial burden of proof to establish that Plaintiff was aware that the documents he signed were deeds.

Plaintiff argues in opposition that both the 2017 and 2019 grant deeds were procured by fraud in the inception, and denies that he was aware that the documents he signed were grant deeds at the time he signed them. (Pl.’s Opp., 2:22–27.) Plaintiff contends that when he “executed the 2017 Grant Deed, he could not read English and had absolutely no understanding of the content, purpose, or effect of the document. The mutual assent to transfer title was lacking, as Plaintiff had a genuine belief that the document was a mere formality of a new loan. As such, the 2017 Grant Deed is void as executed pursuant to fraud in the inception.” (Id., 9:14–17.) Plaintiff further argues that the 2019 grant deed is void for the same reasons. (Id., 10:12–17.)

In support of his arguments, Plaintiff offers his own declaration, along with his same deposition testimony, and discovery responses contending that he was unaware of the nature of the documents he signed. (Pl.’s Resp. to Sep. Stmt., nos. 22, 25, 26.) The Court notes that Plaintiff’s declaration is inadmissible to the extent that it contradicts his previous testimony in order to create a triable issue of material fact. (Gabrielle A. v. County of Orange (2017) 10 Cal.App.5th 1268, 1282–1283.)

Nevertheless, Plaintiff’s discovery responses are consistent with his contention that he was unaware of the nature of the documents he signed at the time they were executed. (Ex. C to Pl.’s Opp., 6:21–25; 7:17–21.) Additionally, Plaintiff stated in his deposition that he believed “the document that I was going to sign, it was to -- like, to get back the document that signed in the year 2017. It was to obtain the loan, not to transfer and to give up the property -- or to transfer the property.” (Ex. D to Pl.’s Opp., 64:7–11.) Throughout his deposition testimony, Plaintiff maintains that he believed the documents he signed were related to a $250,000 loan for defendant Victor Marquez. (Id., 47:1–48:10, 48:22–49:3, 62:3–13.) Based on the foregoing, the Court finds that Plaintiff has satisfied his responsive burden to show that a triable issue of material fact remains as to whether he knew that the documents he signed were grant deeds at the time of their execution.

Moving Defendants argue in reply that Plaintiff “did know he was signing Grant Deeds, he just did not, apparently, know he was taking himself off of title completely.” (Def.’s Reply, 7:3–4 [emphasis in original].) Moving Defendants further argue that “the law effectively presumes that everyone who signs a contract has read it thoroughly, whether or not that is true. … Moreover, generally, one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he or she has not read it; if he or she cannot read, he or she should have it read or explained to him or her.” (Def.’s Reply, 7:12–16.)

However, the Court notes that Moving Defendants raise this issue for the first time on reply. Generally, a reply memorandum should not raise new issues but should instead address only the issues raised in the opposition. (American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453 (“Points raised for the first time in [an appellate] reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.”).) As such, the Court declines to consider this issue.

The Court finds that Plaintiff has met his responsive burden to show that a triable issue of material fact exists as to whether Plaintiff was aware that the documents he signed were grant deeds. As such, a triable issue remains as to whether the 2019 grant deed is void or voidable, and thus whether Moving Defendants may take the property as bona fide purchasers for value. Accordingly, Moving Defendants’ motion for summary judgment is denied.

[1] Moving Defendants observe, and the Court takes judicial notice, that the 2017 grant deed was set aside and vacated by the bankruptcy court, and is therefore no longer at issue. (MSJ, 11:12–13.) Plaintiff does not dispute this fact. (Pl.’s Resp. to Sep. Stmt., n. 20.)