Judge: Steven J. Kleifield, Case: 22STCV30646, Date: 2023-04-24 Tentative Ruling

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Case Number: 22STCV30646    Hearing Date: April 24, 2023    Dept: 57

Plaintiff Artak Agamalian has brought an action against Defendants Arsen Mkerchyan and Amerisource Capital Group, LLC seeking to quiet title to real property located at 3919 Mayfield Ave, Glendale, CA 91214 (the “Subject Property”).  According to Agamalian’s complaint, Mkerchyan obtained legal title to the Subject Property in connection with an agreement in which Mkerchyan promised to refinance Agamalian’s existing indebtedness to Mkerchyan on loans secured by the Subject Property and then transfer legal title back to Agamalian after Agamalian paid off the new loan arising from the refinancing that also was secured by the Subject Property.  Defendants have demurred to the complaint on two grounds.   The Court’s tentative ruling is to sustain the demurrer as to both grounds, albeit with leave to amend.

First, Defendants point out that Agamalian concedes in his complaint that he owns only an equitable interest in the Subject Property and that Mkerchyan is the legal owner.  From there, Defendants invoke the rule that an owner of an equitable interest in real property cannot maintain an action to quiet title against the owner of the legal title to the property.  (See Stafford v. Ballinger (1962) 199 Cal.App.2d 289, 294-295 [setting forth rule barring equitable owners from quieting title against the legal owners].)  In his opposition to the demurrer, Agamalian contends that this rule does not apply because the complaint alleges that Mkerchyan acquired legal title from him through fraud.   (See Liberty Nat’l Enterprises, L.P. v. Chicago Title Ins. Co. (2013) 217 Cal.App.4th 62, 81 [setting forth fraud exception to the equitable ownership rule].)   In the Court’s view, however Agamalian’s complaint contains insufficient allegations that the Defendants perpetrated a fraud against Agamalian in connection with the transfer of the legal title to the Subject Property to Mkerchyan.  The closest the complaint comes to alleging fraud is in paragraph 43, which states that Mkerchyan never intended to transfer to transfer legal title to the Subject Property back to Agamalian even if Agamalian complied with his obligations under the agreement to pay off the new loan.  The problem for Agamalian on this front is that fraud must be alleged with specificity.  (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)    Paragraph 43 is not specific enough.

Second, Defendants point out that Agamalian concedes in his complaint that he has not paid off the debt he owes to Mkerchyan under the agreement.  From there, Defendants invoke what is known as the “tender” rule, which provides that a borrower may not maintain a quiet title action against a secured lender without first paying the outstanding debt owed to the lender.   (Lueras v. BAC Home Loans Servicing, LP (221 Cal.App.4th 49, 86 [setting forth tender rule].)  In his opposition, Agamalian contends the tender rule does not apply by dint of the exception for cases in which the borrower is challenging the validity of the debt.  (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112.)  The problem for Agamalian on this second front is that his complaint does not seek to cancel his indebtedness to Mkerchyan on the ground that it is invalid.  Agamalian also contends that legal tender rule does not apply because the complaint alleges that he has sought an accounting of his indebtedness from Mkerchyan but that Mkerchyan has not accounted to him.  Agamalian cites no precedent, however, standing for the proposition that the tender rule is inapplicable when the lender does not account to the borrower.

Because it is still possible at this early stage of the case for Agamalian to plead around these defects in his complaint, the Court is sustaining the Defendants’ demurrer with leave to amend.   Agamalian is directed to serve and file his amended complaint within 21 days from the date of the hearing on the demurrer.