Judge: Stephen P. Pfahler, Case: 21CHCV00636, Date: 2023-04-27 Tentative Ruling
Case Number: 21CHCV00636 Hearing Date: April 27, 2023 Dept: F49
Dept. F-49
Date: 4-27-23
Case # 21CHCV00636
Trial Date: N/A
SUMMARY JUDGMENT
MOVING PARTY: Plaintiff, Bank of America
RESPONDING PARTY: Defendant, Jaime Garcia
RELIEF REQUESTED
Motion for Summary Judgment
SUMMARY OF ACTION
Plaintiff Bank of America alleges that on February 21,
2008, a Grant Deed was executed transferring title to 10347 Aldea Ave., Granada
Hills to Defendant Jaime Garcia. On March 6, 2008, Garcia executed a $64,875
deed of trust on the property with Bank of America.
On January 25, 2011, Garcia transferred one-half/50%-50%
interests in the property to Defendants David and Diane Greenberg, and Jaime
Farias and Myrna Farias via Grant Deed. A Substitution of Trustee and Full Reconveyance
purportedly reconveying the Bank of America Deed of Trust was executed and
recorded on March 16, 2015. Plaintiff alleges the deed of trust was erroneously
reconveyed, and remains attached to the property until paid off.
On August 20, 2021, Plaintiff filed a complaint for
Declaratory Relief, Cancellation of Instruments, Reformation of Instruments,
and To Impress an Equitable Lien. A corrective notice of lis pendens was
recorded on August 31, 2021. On October 15, 2021, Plaintiff dismissed the second
and third causes of action for Cancellation of Instruments and Reformation of
Instruments causes action.
On November 24, 2021, the court sustained the demurrer to
the fourth cause of action with leave to amend. On December 17, 2021, Bank of
America filed a verified first amended complaint for Declaratory Relief, and To
Impress an Equitable Lien. Defendant answered on January 12, 2022, then filed a
verified first amended answer of January 20, 2022.
RULING: Denied
Request for
Judicial Notice: Granted.
·
The court takes judicial notice of the grant
deed, deed of trust, and reconveyance documents.
·
The court takes judicial notice of the filed
pleadings and minute orders, but not the truth of the matter asserted in the
allegations or order.
Evidentiary
Objections to the Declaration of Michelle Holley: Overruled.
Evidentiary
Objections to the Declaration of Jaime Garcia: Overruled (Code Civ. Proc.,
437c, subd. (q).)
Plaintiff Bank
of America moves for summary judgment on grounds that the loan neither expired
nor was paid off, but only lost due to mistake on the Impress an Equitable Lien
cause of action. Plaintiff maintains an actual and present controversy
regarding the parties’ rights and obligations on the subject property, thereby
supporting the declaratory relief claim.
Defendant
Jaime Garcia in opposition contends the action is barred by the statute of
limitations on grounds that any claim for implied equitable indemnity based on
mistake is subject to a three (3) year statute of limitations. (Code Civ.
Proc., § 338, subd. (d).) Garcia alternatively argues the note was payable in
installments, thereby rendering any claims to exactly six (6) years from the
last installment at the time of the filing of the action. Garcia denies any
actual balloon payment term within the note itself, thereby altering the
statute of limitations. Garcia next argues for triable issues of material fact
regarding compliance with the required provision of the Federal Disclosure
Statement requirements. Garcia finally states that Bank of America improperly
seeks monetary damages, when in fact the complaint lacks any allegations
seeking such relief.
Bank of America
in reply challenge the argument for the three year statute of limitations under
Code of Civil Procedure section 338, reiterates the description of the
agreement as a “balloon note,” and denies the allege failure to provide a
disclosure statement establishes any triable issues of material fact. Bank of
America denies it’s seeking any monetary damages, only the amount of the
indebtedness in the form of an equitable lien. Defendant also denies any
acceleration of the note.
The law of summary judgment
provides courts “a mechanism to cut through the parties’ pleadings in order to
determine whether, despite their allegations, trial is in fact necessary to
resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001)
25 Cal.4th 826, 843 (Aguilar).) In reviewing a motion for summary judgment,
courts employ 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.)
The pleadings frame the issues for
motions, “since it is those allegations to which the motion must respond. (Citation.)” (Scolinos
v. Kolts (1995) 37 Cal. App. 4th 635, 640-641; FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 382-383; Jordan-Lyon Prods., LTD., v. Cineplex Odeon Corp. (1994) 29
Cal.App.4th 1459, 1472.) 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, subd. (p)(1).) Plaintiff need
not disprove all defenses, if the elements of a cause of action are made. (Oldcastle Precast, Inc. v. Lumbermens Mutual
Casualty Co. (2009) 170 Cal.App.4th 554, 564; WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4th 525,
532.) “When deciding whether to grant summary judgment, the court must consider
all of the evidence set forth in the papers (except evidence to which the court
has sustained an objection), as well as all reasonable inference that may be
drawn form that evidence, in the light most favorable to the party opposing
summary judgment.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467; see also Code Civ. Proc., §
437c, subd. (c).) “An issue of fact can
only be created by a conflict in the evidence.
It is not created by speculation, conjecture, imagination or
guesswork.” (Lyons v. Security Pacific National Bank (1995) 40 Cal.App.4th 1001,
1041 (citation omitted).)
Bank of America moves for summary judgment/summary
adjudication on the equitable lien on grounds of mistake or inadvertence. A
party may allege a claim for equitable lien where a secured interest exists,
but a defect in execution or other circumstance renders the written agreement
no longer enforceable. The equitable lien claim arises following the loss of
the secured interest due to the recording of the reconveyance. (Aguilar v. Bocci (1974) 39 Cal.App.3d 475,
477; Beal v. United Properties Co.
of California (1920) 46 Cal.App. 287, 297; see Coast Bank v. Minderhout (1964)
61 Cal.2d 311, 314-315 overruled by Wellenkamp v. Bank of America (1978)
21 Cal.3d 943 on unrelated grounds.)
Bank of America also denies any expiration of
the debt under the terms of the note itself. The maturity date on the note was
April 1, 2023, and Bank of America contends a six year statute of limitations
applies. Commercial Code section 3118
provides in relevant part: “(a) Except as provided in
subdivision (e), an action to enforce the obligation of a party to pay a note
payable at a definite time shall be commenced within six years after the due
date or dates stated in the note or, if a due date is accelerated, within six
years after the accelerated due date.” (Cal. U. Com. Code, § 3118,
subd. (a).)
The argument relies on the
characterization of the note as a negotiable instrument based on the promise to
pay the fixed amount identified in the note. Commercial Code section 3104 provides the following
definition:
(a) Except as provided in subdivisions (c) and (d),
“negotiable instrument” means an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the
promise or order, if it is all of the following:
(1) Is payable to bearer or to order at the time it is
issued or first comes into possession of a holder.
(2) Is payable on demand or at a definite time.
(3) Does not state any other undertaking or instruction by
the person promising or ordering payment to do any act in addition to the
payment of money, but the promise or order may contain (i) an undertaking or
power to give, maintain, or protect collateral to secure payment, (ii) an
authorization or power to the holder to confess judgment or realize on or
dispose of collateral, or (iii) a waiver of the benefit of any law intended for
the advantage or protection of an obligor.
(b) “Instrument” means a negotiable instrument.
(c) An order that meets all of the requirements of
subdivision (a), except paragraph (1), and otherwise falls within the
definition of “check” in subdivision (f) is a negotiable instrument and a
check.
(d) A promise or order other than a check is not an
instrument if, at the time it is issued or first comes into possession of a
holder, it contains a conspicuous statement, however expressed, to the effect
that the promise or order is not negotiable or is not an instrument governed by
this division.
(e) An instrument is a “note” if it is a promise and is a
“draft” if it is an order. If an instrument falls within the definition of both
“note” and “draft,” a person entitled to enforce the instrument may treat it as
either.
…
(Cal. U. Com. Code, § 3104.)
Because the note constitutes a
“balloon” payment agreement, the statute only begins to run upon the date of
the final payment due date. Bank of America denies any acceleration of the
loan, thereby altering the accrual of the claim and impacting the statute of
limitations calculation.
The
court acknowledges the argument in opposition regarding the lack of any sought
after monetary recovery, but still finds discussion of the statute of
limitations relevant for purposes of adjudicating the action. The existence of
a valid, collectible debt remains integral to the subject matter.
The title of the acknowledged agreement is “BALLOON NOTE
(Fixed Rate).” [Declaration of Michelle Holly, ¶ 9, Ex. 2.] Garcia acknowledges
the existence of this agreement. [Declaration of Brandon Mika, ¶¶ 7, 10, Ex. 2,
4, 7.] Contrary to the arguments of Garcia, the agreement constitutes a balloon
payment agreement, regardless of whether monthly installment payments were due
prior to the final payment or not.
Nevertheless, Bank of America seeks to enforce the statute
of limitations based on the final balloon payment date, yet only cites out of
state authority regarding the accrual of the entire balance due, with a
noticeable of any California legal authority in support of the argument. As
stated above, the plain language Commercial Code section 3118 specifically
provides for accrual of the statute of limitations upon the accrual date of the
payment(s), which includes installment payments in this context. (Cal. U. Com. Code, § 3118, subd.
(a).)
Nothing in the motion or reply establishes a revival
of any sums due and owing, yet without any prior effort to invoke the
acceleration clause or file an earlier complaint. (White v. Moriarty (1993) 15 Cal.App.4th 1290, 1299
[Statute of limitations accrues on unpaid installment following the date the
installment is due].) The court therefore rejects any sought after debt
collection beyond six years.
On the argument regarding the three-year statute of
limitations under the mistake standard, the court finds the argument barring
collection on the note inapplicable. “‘An equitable lien is a right to subject property not in
the possession of the lienor to the payment of a debt as a charge against that
property. [Citation.] It may arise from a contract which reveals an intent to
charge particular property with a debt or “out of general considerations of
right and justice as applied to the relations of the parties and the circumstances
of their dealings.” [Citation.] “The basis of equitable
liens is variously placed on the doctrines
of estoppel, or unjust enrichment, or on the principle that a person having
obtained an estate of another ought not in conscience to keep it as between
them; and frequently it is based on the equitable
maxim that equity will deem as done that which ought
to be done, or that he who seeks the aid of equity
must himself do equity.” [Citation.]’” (Campbell
v. Superior Court (2005) 132 Cal.App.4th
904, 912.) “An action for relief on the ground of fraud or mistake. The cause
of action in that case is not deemed to have accrued until the discovery, by
the aggrieved party, of the facts constituting the fraud or mistake.” (Code
Civ. Proc., § 338, subd. (d).) “A lien is
extinguished by the lapse of time within which, under the provisions of the
Code of Civil Procedure … (1.) An action can be brought upon the principal
obligation.” (Civ. Code, § 2911; Filmservice Laboratories, Inc. v. Harvey Bernhard Enterprises,
Inc. (1989) 208
Cal.App.3d 1297, 1308-1309; Beal v. United Properties Co., supra, 46
Cal.App. at p. 298.) The reconveyance was recorded on March 16, 2015; the complaint was filed on February
17, 2021. The unsecured note
itself remains governed by Commercial Code section 3118, as addressed above,
and the court declines to conflate the unsecured note with the equitable lien
claim.
The court therefore finds the equitable lien claim is not
barred by the statute of limitations. The court also finds that Bank of America
supports for the argument regarding the mistaken reconveyance of the deed of
trust. [Holly Decl., ¶ 31.] Nevertheless, to the extent the equitable lien
depends on the calculation of the exact balance due, as addressed above, the
court cannot and otherwise declines to determine the outstanding balance of the
equitable lien. Under the terms of the note, payments began on May 1, 2008, and
the complaint was not filed until August 20, 2021. The court cannot determine
the date of any payments, credits, default, or accrual date on any potential
remaining balance. The court therefore DENIES Bank of America’s motion for
summary judgment in that the court cannot enter an order or judgment regarding
the value of the lien, as presented in the motion.
On the declaratory relief cause of action, the court denies
the motion due to the failure to establish specific terms of relief due. Declaratory relief arises under
Code of Civil Procedure section 1060, which states in part:
“Any
person interested under a contract, or who desires a declaration of his or her
rights or duties with respect to another, or in respect to, in, over or upon
property … may, in cases of actual controversy relating to the legal rights and
duties of the respective parties, bring an original action or cross-complaint
in the superior court for a declaration of his or her rights and duties in
the premises, including a determination of any question of construction or
validity arising under the instrument or contract. He or she may ask for a
declaration of rights or duties, either alone or with other relief; and the
court may make a binding declaration of these rights or duties, whether or not
further relief is or could be claimed at the time. The declaration may be
either affirmative or negative in form and effect, and the declaration shall
have the force of a final judgment. The declaration may be had before there has
been any breach of the obligation in respect to which said declaration is
sought.”
“‘[S]ection
1060 does not require a breach of contract in order to obtain declaratory
relief, only an ‘actual
controversy.’ Declaratory relief pursuant to this section has
frequently been used as a means of settling controversies between parties to a
contract regarding the nature of their contractual rights and obligations.’” (Osseous Technologies of America, Inc. v.
DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 365.)
Declaratory relief operates prospectively. (Id.
at p. 366.)
“[U]nder
California rules, an actual controversy that is currently active is required
for such relief to be issued, and both standing and ripeness are
appropriate criteria in that determination. (Citation.) One cannot analyze
requested declaratory relief without evaluating the nature of the rights and
duties that plaintiff is asserting, which must follow some recognized or
cognizable legal theories, that are related to subjects and requests for relief
that are properly before the court.”
(Otay Land Co.v. Royal Indemn. Co. (2008)
169 Cal.App.4th 556, 563.)
While
the court finds no basis for a bar to the claim, like the equitable lien claim,
the court declines to determine exact terms of any potential relief due to Bank
of America. The motion is therefore denied on the declaratory relief claim.
The
court otherwise finds the argument the failure to comply with the Federal
Disclosure requirements was not raised in the answer, and the court declines to
consider new arguments raised in the opposition.
The motion for summary judgment is denied, as well as the
individual motions for summary adjudication.
Final Status Conference set for June 15, 2023.
Bank of America to provide notice.