Judge: Teresa A. Beaudet, Case: 19STCV42782, Date: 2023-05-10 Tentative Ruling

Case Number: 19STCV42782    Hearing Date: December 20, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Qing Zhao (“Zhao”) filed this action on November 26, 2019 against Defendants Chen Wang (“Wang”), Zoe Chow a.k.a. Zoe Chow Szeman (“Chow”), Rachel Shui, and Pai Sung Lin (“Lin”).  

Zhao filed the operative Verified First Amended Complaint (“FAC”) on December 5, 2019, alleging causes of action for (1) rescission of contract, (2) cancellation of recorded instrument, (3) breach of fiduciary duty, (4) fraud – concealment, (5) constructive fraud, (6) civil conspiracy, (7) slander of title, (8) quiet title, (9) violation of Business and Professions Code section 17200 et seq., (10) “lack of standing to foreclosure,” (11) intentional infliction of emotional distress, (12) declaratory relief/indemnity, (13) unjust enrichment, (14) misconduct or negligent of notary public and collection under notary bond, and (15) injunctive relief.  

Lin’s counsel states that “on March 6, 2020, Plaintiff dismissed all of her tort claims and monetary damage claims as against Lin. The only remaining claims, quiet title, cancellation of instrument and rescission of contract, as against Lin seek only to avoid Lin’s Deed of Trust in its entirety.” (Beall Decl., ¶ 4.) The Court notes that it is unable to locate any such request for dismissal filed on March 6, 2020. 

In the FAC, Zhao alleges, inter alia, that she and Wang “were married on December 19, 2015, and have thereafter been married to each other until July 26, 2019 when they separated.” (FAC, ¶ 11.) During the marriage, Zhao and Wang purchased a real property located at 4900 N. Grand Avenue., Unit 158, Covina, CA 91754 (the “Subject Property”). (FAC, ¶ 12.) Zhao alleges that “[w]hile both [Zhao] and WANG are on title of the Covina Property, the source of funds for the purchase of the Covina Property was derived from [Zhao’s] sole and separate property.” (FAC, ¶ 12.)

Zhao further alleges that “[o]n or about April 19, 2019, without [Zhao’s] knowledge and consent, WANG obtained a loan in the amount of $230,000.00…from [Lin]…” (FAC, ¶ 15.) Zhao alleges that Chow forged Zhao’s signature on the Deed of Trust. (FAC, ¶ 18.) Zhao alleges that she “discovered Defendants’ fraudulent acts after [Zhao] became aware of the foreclosure proceeding of the Subject Property by [Lin].” (FAC, ¶ 23.)

On June 22, 2020, Lin filed a Cross-Complaint against Zhao, Wang, and Chow. The Cross-Complaint alleges causes of action for (1) fraud, (2) negligent misrepresentation, (3) conversion, (4) common count-money had and received, (5) intentional infliction of emotional distress, (6) Conspiracy to commit mortgage fraud, (7) fraudulent transfer, (8) quit title, (9) imposition of an equitable lien (in the alternative), and (10) declaratory relief.

In the Cross-Complaint, Lin alleges, inter alia, that “[o]n or about April 17, 2019, LIN provided a mortgage loan to WANG and QING ZHAO in the amount of $230,000.00 (the ‘Loan’). The Loan consisted of a promissory note promising to repay the borrowed $230,000.00, and a Deed of Trust which was recorded on April 19, 2019…which encumbered the Subject Property to secure repayment of the Loan.” (Cross-Compl., ¶ 9.) Lin alleges that “WANG secured the assistance of CHOW, and…WANG and CHOW conspired to impersonate QING ZHAO and to sign the promissory note and Deed of Trust on her behalf.” (Cross-Compl., ¶ 14.) Lin further alleges that “as part of the divorce settlement between QING ZHAO and WANG, WANG intends to and/or has already transferred any and all interest he had or maintained in the Subject Property to QING ZHAO.” (Cross-Complaint, ¶ 21.) Lin alleges that “he is at risk of losing out on repayment of the Loan, either as a result of WANG’s transfer of the Subject Property to QING ZHAO, QING ZHAO seeking to rescind, cancel, or void the Loan, and/or as a result of the failure to obtain repayment of the Loan.” (Cross-Compl., ¶ 23.)

In addition, on March 8, 2021, Zhao filed a Verified Complaint against Lin and Nominal Defendant Asset Default Management Inc. in Case No. 21STCV09104, asserting causes of action for (1) wrongful foreclosure, (2) rescission of unlawful foreclosure, (3) identity theft, (4) violation of California Homeowner Bill of Rights, (5) quiet title, (6) intentional infliction of emotional distress, (7) unjust enrichment, and (8) breach of stipulation/contract.

On September 7, 2022, the Court issued a minute order in the instant action providing, inter alia, that “[t]he Court orders the following cases, 19STCV42782 and 21STCV09104, consolidated and assigned to Department 50 in Stanley Mosk Courthouse for all purposes. The Court designates 19STCV42782 as the lead case. All future documents must be filed under 19STCV42782 (QING ZHAO vs CHEN WANG, et al.). Case numbers on all subsequent filings should be reflected under the lead case.”

Lin moves “for an order to bifurcate the trial on the equitable issues, from trial of any legal issues, and that the trial is held first before the Court.” Zhao opposes.

On August 21, 2023, the Court issued a minute order providing, inter alia, “[h]earing - Other Regarding Bifurcation is continued to 10/19/2023…The parties will file, five (5) court days before the hearing, a brief addressing the issue raised regarding whether the subject property was community property or separate property of Ms. Zhao.”[1]

Discussion

Code of Civil Procedure section 1048, subdivision (b) provides: “[t]he court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue or of any number of causes of action or issues, preserving the right of trial by jury required by the Constitution or a statute of this state or of the United States.” (Code Civ. Proc., § 1048, subd. (b).)

Code of Civil Procedure sections 597 and 598 allow a court to order that the trial of any issue or part thereof proceed before the trial of any other issue to promote the ends of justice or the economy and efficiency of handling the litigation. Additionally, Evidence Code section 320 provides that trial courts have discretion to regulate the order of proof. “[T]rial courts have broad discretion to determine the order of proof in the interests of judicial economy.” (Grappo v. Coventry Fin. Corp. (1991) 235 Cal.App.3d 496, 504.) The objective of bifurcation is “avoidance of the waste of time and money caused by the unnecessary trial of damage questions in cases where the liability issue is resolved against the plaintiff.” (Horton v. Jones (1972) 26 Cal.App.3d 952, 955.)

In the instant motion, Lin “requests that the trial be bifurcated and the equitable issues tried separately and first before the Court.” (Mot. at p. 4:20-21.) Lin notes that the FAC and the Cross-Complaint in the instant action contain causes of action for quiet title and declaratory relief. Lin asserts that these causes of action are equitable in nature.

Lin cites to Westerholm v. 20th Century Ins. Co. (1976) 58 Cal.App.3d 628, 632, footnote 1, where the Court of Appeal noted that “[a]n action for declaratory relief is equitable, and a court of equity will administer complete relief when it assumes jurisdiction of a controversy.” Lin also cites to Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1241, where the Court of Appeal noted that “the second claim to quiet title was one in equity.” The Nwosu Court noted that “[a] jury trial, [a]s a general proposition…is a matter of right in a civil action at law, but not in equity. An action at law is one for which a jury trial was permitted at common law as it existed at the time our Constitution was first adopted in 1850…Where plaintiff’s claims consist of a ‘mixed bag’ of equitable and legal claims, the equitable claims are properly tried first by the court. A principal rationale for this approach has been explained as follows: When an action involves both legal and equitable issues, the equitable issues, ordinarily, are tried first, for this may obviate the necessity for a subsequent trial of the legal issues.” (Id. at pp. 1237-1238 [internal quotations and citations omitted].)

Lin asserts that “the parties [sic] respective operative pleadings also contain tort causes of action seeking monetary damages. As such, for the sake of judicial economy, Lin requests that the trial be bifurcated and that the equitable claims be tried first before the Court.” (Mot. at p. 5:7-9.) Lin asserts that “resolution of the equitable claims will moot the legal claims.” (Mot. at p. 5:10.) More specifically, Lin argues that “if the Court renders a judicial determination that Plaintiff’s remedy on her First Amended Complaint is limited to partially setting aside Lin’s Deed of Trust only as to her former community property interest, then Lin’s Deed of Trust remains a valid and enforceable encumbrance as against Wang’s former community property interest. A judicial determination finding that Lin’s Deed of Trust remains as a valid and enforceable lien against Wang’s former community property interest will, as a consequence, moot Plaintiff’s causes of action seeking tort damages for wrongful foreclosure.” (Mot. at p. 6:16-22.)

 Lin cites to Hyatt v. Mabie (1994) 24 Cal.App.4th 541, 543, where “[a]fter entry of a judgment dissolving the marriage of Kathy Hyatt (plaintiff) and Jerry Hyatt (Hyatt) and disposing of the community property, plaintiff sought damages against defendants, beneficiaries of a trust deed executed during the marriage by Hyatt without plaintiff’s knowledge or consent. The trust deed encumbered Hyatt’s interest in real property held in joint tenancy with plaintiff. The judgment of dissolution had found the real property, a residence in Citrus Heights, was community property, awarded it to plaintiff and Hyatt as ‘co-equal tenants in common’ and directed that it be ‘listed for sale and sold forthwith.’ Plaintiff first learned, approximately four months after the judgment of dissolution was entered, that Hyatt had unilaterally encumbered the Citrus Heights property. Nevertheless, after acquiring this knowledge, plaintiff signed instructions directing the escrowee to pay defendants from the proceeds of sale of the Citrus Heights property the amount of the indebtedness secured by the Hyatt trust deed. The trial court gave judgment for defendants.” The Court of Appeal affirmed.

The Hyatt Court noted that “[i]n Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26…the court held that during the existence of the community a nonconsenting spouse is entitled to invalidate in its entirety an encumbrance which violates [Civil Code] section 5127.” (Hyatt v. Mabie, supra, 24 Cal.App.4th at pp. 545-546 [internal emphasis omitted].) The Hyatt Court further found that “Droeger is factually distinguishable. Plaintiff did not learn of the encumbrance until after the marriage had been dissolved and the community property divided. Unlike the facts in Droeger, here the community no longer existed. That being so, the reasons supporting the remedy of entire voidability no longer obtained…Decisions which involved facts similar to those before us were discussed in Droeger. Under those decisions, if the nonconsenting spouse does not discover the encumbrance until, as here, the marriage and the community have been terminated, either by dissolution or death, the remedy of the nonconsenting spouse is limited to voiding the transfer to the extent only of that spouse’s community property interest.” (Id. at p. 546.)

In the opposition, Zhao argues that “[t]he situation in the present case is very different from Droeger. Here, there is no valid lien. As discussed above, the Deed of Trust is void because of fraud. The only way for Mr. Lin to prevail would be for the Court to re-write the deed and it is not property [sic] for the Court to give such equitable relief. Without a valid lien, the provisions of Section 1102 simply do not apply. Even if the holding in Droeger was helpful to Mr. Lin, there is no need for bifurcation. There are two separate and independent reasons why the foreclosure was wrongful: (1) The Deed of Trust is void; and (2) Mr. Lin ignored his stipulation to delay the foreclosure and violated a court order by proceeding. Even if the Deed of Trust is found to be valid, the Court will still need to hear testimony from witnesses regarding the facts of the foreclosure and Ms. Zhao’s damages. That evidence will be admitted regardless of whether or not the Court decides the Droeger decision is applicable to this case. If the Court bifurcates the trial, a second session will have to be held, regardless of the outcome of the first.” (Opp’n at p. 8:11-22.)

In the reply, Lin asserts that “Plaintiff’s Opposition fails to address the fact that only Plaintiff’s signature on the Deed of Trust is forged…Plaintiff’s Opposition also fails to address the fact that it is undisputed that Plaintiffs ex-husband’s (Wang) signature on the Deed of Trust is not forged…These undisputed and stipulated facts clearly and unequivocally demonstrate that the holding in Droeger is relevant because while Plaintiff may not have consented to Lin’s Deed of Trust, her ex-husband, did, in fact, consent to Lin’s Deed of Trust.” (Reply at p. 3:3-9.)

            But Lin does not appear to address Zhao’s assertion that, inter alia, “Mr. Lin ignored his stipulation to delay the foreclosure and violated a court order by proceeding. Even if the Deed of Trust is found to be valid, the Court will still need to hear testimony from witnesses regarding the facts of the foreclosure and Ms. Zhao’s damages.” (Opp’n at p. 8:17-19.)

In addition, as discussed, Lin argues that “[a] judicial determination finding that Lin’s Deed of Trust remains as a valid and enforceable lien against Wang’s former community property interest will, as a consequence, moot Plaintiff’s causes of action seeking tort damages for wrongful foreclosure.” (Mot. at p. 6:19-22.) But Lin’s counsel states in her supporting declaration that “on March 6, 2020, Plaintiff dismissed all of her tort claims and monetary damage claims as against Lin. The only remaining claims, quiet title, cancellation of instrument and rescission of contract, as against Lin seek only to avoid Lin’s Deed of Trust in its entirety.” (Beall Decl., ¶ 4.)

It is thus unclear what specific “equitable issues” Lin seeks to bifurcate from the unspecified “legal issues.” As discussed above, there are a number of causes of action alleged in the FAC and the Cross-Complaint in this action, as well as in the Complaint filed by Zhao in Case No. 21STCV09104. Although Lin argues that “resolution of the equitable claims will moot the legal claims” (Mot. at p. 5:10), the motion does not clearly specify what causes of action in the operative pleadings Lin asserts are equitable, and how they will moot all of the remaining “legal” causes of action alleged in the operative pleadings.

Based on the foregoing, the Court does not find that Lin has demonstrated good cause “to bifurcate the trial on the equitable issues, from trial of any legal issues.”

Conclusion

            Based on the foregoing, Lin’s motion is denied, without prejudice.    

            Lin is ordered to provide notice of this ruling.

DATED:  December 20, 2023                        ________________________________

Hon. Rolf M. Treu

Judge, Los Angeles Superior Court