Judge: Walter P. Schwarm, Case: 30-2020-01124778, Date: 2022-09-13 Tentative Ruling
Motion No. 1:
Defendant’s (American Financial Center, Inc.) Demurrer to Plaintiff Anh Thi Thy song Nguyen, Trustee of Mother Nature Trust’s Third Amended Complaint (Demurrer), filed on 7-26-22 under ROA No. 839, is SUSTAINED in part and OVERRULED in part as set forth below.
The court GRANTS Defendant’s Request for Judicial Notice, filed on 7-26-22 under ROA No. 831, pursuant to Evidence Code section 452, subdivision (d).
“A demurrer tests the pleading alone, and not the evidence or the facts alleged. . . . To the extent there are factual issues in dispute, however, this court must assume the truth not only of all facts properly pled, but also of those facts that may be implied or inferred from those expressly alleged in the complaint. [Citations.]” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) Code of Civil Procedure section 452, states, “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” Perez v. Golden Empire Transportation Transit District (2012) 209 Cal.App.4th 1228, 1238, provides, “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant. [Citations.]” C.A. v. William S. Hart Union High School District (2012) 53 Cal.4th 861, 872 (C.A.), provides, “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged. [Citation.]”
The Demurrer challenges the fourth, fifth, and sixth causes of action contained in Plaintiff’s Third Amended Complaint (TAC), filed on 6-22-22 under ROA No. 795, pursuant to Code of Civil Procedure sections 430.10, subdivisions (e) and (f).
Fifth Cause of Action (Cancellation of Written Instruments):
Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1193-1194 (Thompson), states, “ ‘Under Civil Code section 3412, “[a] written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” To prevail on a claim to cancel an instrument, a plaintiff must prove (1) the instrument is void or voidable due to, for example, fraud; and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one's position. [Citation.]’ [Citation.]”
Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar), states, “ ‘The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’ [Citations.]” “In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] ‘Thus “ ‘the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.’ ” [Citation.] [¶] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.’ [Citation.] A plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’ [Citation.]” (Id., at p. 645; Italics in Lazar.)
Stueve Brothers Farms, LLC v. Berger Kahn (2013) 222 Cal.App.4th 303, 323 (Stueve) explains, “ ‘Although conspiracy to commit a tort is not a separate cause of action from the tort itself, alleging a conspiracy fastens liability on those who agree to the plan to commit the wrong as well as those who actually carry it out. [Citation.] The elements of a civil conspiracy are the formation and operation of the conspiracy and damage resulting to plaintiff from an act done in furtherance of the common design. [Citation.]’ [Citations.]” City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 212 (City of Industry) provides, “The elements of a civil conspiracy are (1) the formation of a group of two or more persons who agreed to a common plan or design to commit a tortious act; (2) a wrongful act committed pursuant to the agreement; and (3) resulting damages. [Citation.]” To the extent the SAC attempts to plead a conspiracy based on the acts of Ms. Zucaro (SAC, ¶ 12), the SAC does not plead the required elements under Steuve and City of Industry.)
Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415 (Rosenthal), states, “California law distinguishes between fraud in the ‘execution’ or ‘inception’ of a contract and fraud in the ‘inducement’ of a contract. In brief, in the former case ‘ “the fraud goes to the inception or execution of the agreement, so that the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking, and [the contract] is void. In such a case it may be disregarded without the necessity of rescission.” ’ [Citation.] Fraud in the inducement, by contrast, occurs when ‘ “the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable. In order to escape from its obligations the aggrieved party must rescind . . . .” ’ [Citation.]” (Italics in Rosenthal.)
People v. Schmidt (2019) 41 Cal.App.5th 1041, 1058 (Schmidt), states, “The People resist this conclusion, arguing that the quitclaim deeds were induced by fraud. That may be so, but the People have not directed our attention to any authority establishing that fraud in the inducement renders an instrument ‘false’ within the meaning of section 115, and we decline to so hold. We reiterate that section 115 reaches instruments which, ‘if genuine, might be filed, registered, or recorded under any law of this state . . . .’ (§ 115, subd. (a), emphasis added.) 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. (See, e.g., Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106, 215 Cal.Rptr. 748 [‘If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser’].) By contrast, ‘a forged document is void ab initio and constitutes a nullity; as such it cannot provide the basis for a superior title as against the original grantor.’ (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43, 198 Cal.Rptr. 418; see City of Los Angeles v. Morgan (1951) 105 Cal.App.2d 726, 733, 234 P.2d 319 [‘An instrument that is void ab initio is comparable to a blank piece of paper and so necessarily derives no validity from the mere fact that it is recorded’].) Likewise, a deed altered without authority before delivery or recording (see, e.g., Montgomery v. Bank of America Nat. Trust & Savings Ass'n (1948) 85 Cal.App.2d 559, 563, 193 P.2d 475), or a deed procured by fraud in the inception (as opposed to fraud in the inducement) (see, e.g., Erickson v. Bohne (1955) 130 Cal.App.2d 553, 555-557, 279 P.2d 619), is void and conveys no title to the grantee. (See generally 3 Miller & Starr, Cal. Real Estate (4th ed. 2019) §§ 8:53-8:54, pp. 8-155 to 8-160 [discussing the difference between void and voidable instruments in the context of altered and fraudulently induced deeds].) (Italics in Schmidt.)
As to Defendant, the TAC pleads the following allegations: (1) “American Financial Center, Inc., a California corporation (“American Financial”), has its business office located at 14930 Ventura Boulevard, Suite 320, Sherman Oaks, California 91430. American Financial purports to be the beneficiary under the third deed of trust on the Subject Property based on an alleged $75,000 loan to Helping Others with Zucaro as the guarantor.” (TAC, ¶ 9.); (2) “10434 Calling Road, Agua Dulce, CA: [¶] Zucaro purchased this property on or about 01/23/2019 with a First Trust Deed loan of $568,405 from the Ahdoots, Seller carried back Second Trust Deed of $297.150. There was also a Third Trust Deed of $75,000 recorded against the property for the benefit of American Financial on 07/25/2019. At close of escrow, Zucaro collected about $55,000 in commissions, made about two mortgage payments on the First Trust Deed and property was Noticed for Trustee Sale by Western Fidelity on or about 12/24/2019. This property was purchased by American Financial on 09/03/2021 and the Ahdoots received net proceeds of about $187,000” (TAC, ¶ 42e. (Emphasis and underscore in TAC.).); (3) “On or about July 1, 2019, Helping Others International obtained a loan in the amount of $75,000 secured by a third deed of trust on the Subject Property. The loan was funded by American Financial, who purports to be the beneficiary under a third deed of trust. A copy of the Deed of Trust with Assignment of Rents recorded July 16,2019 as Instrument Number 2019000254315 is attached hereto as Exhibit ‘E’ (‘Third Deed of Trust’).” (TAC, ¶ 52 (Emphasis in TAC.).); (4) “Furthermore, American Financial purportedly loaned $75,000 to Helping Others International and obtained a third deed of trust in connection therewith on the real property located in Agua Dulce referenced below . . . .” (TAC, ¶ 61.); (5) “The most recent purchase of real property, which is the property located at 422 North Soto Street, Los Angeles, California, by Zucaro and Helping Others International using a loan from United Lender, recently closed escrow on November 26, 2019. No legitimate lender would loan to a buyer, such as Helping Others International, who has a history of defaults, unless the lender is participating in a fraudulent scheme to steal an owner's equity in the real property.” (TAC, ¶ 62.); (6) “Based on the fraudulent circumstances surrounding the purchase of the Subject Property and the creation of secured interests in the Subject Property as alleged above, Plaintiff is entitled to rescission of the Purchase Agreement and restoration as the lawful sole owner of the Subject Property.” (TAC ¶ 119.); (7) “Plaintiff seeks to quiet title to the Subject Property as to the adverse claims of all Defendants, including Helping Others International, Zucaro, United Lender, American Financial, and all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the Subject Property adverse to Plaintiff’s title, or any cloud upon Plaintiff’s title thereto. American Financial purportedly loaned $75,000 to Helping Others International and recorded a third deed of trust on the Subject Property. Helping Others International’s title to the Subject Property was void or voidable and had no legal basis to encumber the Subject Property. Plaintiff requested that American Financial remove this third trust deed of $75,000 from the Subject Property, but American Financial has refused.” (TAC ¶ 120.)
The Demurrer states, “The TAC alleges no specific facts of involvement by AFCI in any representations made to Plaintiff to induce her to sell the Marigayle Circle Property to Zucaro. . . . The TAC also alleges no misrepresentations by AFCI at any time at or prior to the May 2019 sale.” (Demurrer; 13:22-14:2.) Plaintiff’s Opposition to American Financial Center, Inc.’s Demurrer to the Third Amended Complaint (Opposition), filed on 8-29-22 under ROA No. 876, responds, “AFCI’s assertion that in order to obtain Cancellation of the Third Deed of Trust, Plaintiff must have alleged misrepresentations by AFCI. This is false, misleading and a Red Herring. The Fraud is alleged against the defendants that affected the transfer of the Subject Property to Helping Others.” (Opposition; 5:26-6:2.) Thus, the Opposition does not contend that Defendant participated in fraudulent conduct that led to the transfer of the subject property to Defendant—Helping Others International, LLC.
The Opposition also states, “In support of this Cause of Action for Cancellation of Instrument, Plaintiff states at ¶ 124 of the TAC ‘Similarly, the First Deed of Trust recorded May 2, 2019, as Instrument Number2019000146649 (Ex. ‘B’) was procured by fraud. The Third Deed of Trust recorded July 16, 2019, as Instrument Number 2019000254315 (Ex. ‘E’) is void or voidable, because Helping Others International’s title to the Subject Property was a result of fraud. One cannot use illegally obtained property as collateral for a loan.’ Here Plaintiff has satisfied the first prong for Cancellation of Instrument. [¶] Then in support of the second prong, Plaintiff states in the TAC at ¶ 125. “If the Purchase Agreement, Grant Deed, First Deed of Trust, and Third Deed of Trust are left outstanding, there is a reasonable apprehension that these instruments may cause additional serious injury to Plaintiff.” (Opposition; 4:23-5:2.)
Here, the TAC does not allege that Defendant’s third deed of trust is void and/or voidable because the other defendants obtained the deed to the subject property by fraud. The TAC appears to allege that its allegations against Defendant—Megan Zucaro for fraud are sufficient and a jury should decide whether there was fraud in the inducement or fraud in the inception. However, “fraud in the inducement” and “fraud in the inception” are two distinct legal theories. Plaintiff does not plead facts to support fraud in the inception of the May 2019 sale. The TAC does not adequately allege that Defendant obtained the third deed of trust by fraudulently inducing Plaintiff to enter into the third deed of trust because Plaintiff is not a party to the third deed of trust. Thus, the TAC does not state a cause of action for cancellation of written instrument against Defendant based on fraud in the inception.
Second, assuming that Plaintiff contends that the third deed of trust was obtained as a result of a fraudulent conspiracy, the TAC pleads, “No legitimate lender would loan a buyer, such as Helping Others International, who has a history of defaults, unless the lender is participating in a fraudulent scheme to steal an owner’s equity in the real property.” (TAC, ¶ 62.) This allegation in conjunction with paragraph 12 of the TAC is insufficient to support a conspiracy theory against Defendant based on the acts of Defendant—Megan Zucaro under Steuve and City of Industry. Specifically, the TAC does not sufficiently plead an agreement between Defendant—Megan Zucaro and Defendant to commit fraud upon Plaintiff with respect to the third deed of trust.
Based on the above the court SUSTAINS the Demurer to the fifth cause of action.
Fourth Cause of Action—Quiet Title:
Deutsche Bank National Trust Co. v. Pyle (2017) 13 Cal.App.5th 513, 524 (Deutsche), states, “The purpose of a quiet title action ‘is to finally settle and determine, as between the parties, all conflicting claims to the property in controversy, and to decree to each such interest or estate therein as he [or she] may be entitled to.’ [Citation.] Actions to quiet title are governed by section 761.010 et seq. The quiet title plaintiff must file a verified complaint including a description of the property, the basis for the plaintiff's claim of title, the adverse claims the plaintiff seeks to adjudicate, the date as of which the plaintiff seeks to adjudicate those claims, and a prayer for the determination of the plaintiff's title against the adverse claims. (§ 761.020.) A quiet title plaintiff must name as defendants “the persons having adverse claims that are of record or known to the plaintiff or reasonably apparent from an inspection of the property.” (§ 762.060, subd. (b).) Any person who has a claim to the property may appear as a defendant, whether or not they are named in the complaint. (§ 762.050.) ‘Immediately upon commencement of the action’ a quiet title plaintiff must record a lis pendens. (§ 761.010, subd. (b).) [¶] Before entering a judgment quieting title, ‘The court shall examine into and determine the plaintiff's title against the claims of all the defendants. The court shall not enter judgment by default but shall in all cases require evidence of plaintiff's title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. The court shall render judgment in accordance with the evidence and the law.’ (§ 764.010, italics added.)”
Code of Civil Procedure section 760.010 states, “As used in this chapter: [¶] (a) ‘Claim’ includes a legal or equitable right, title, estate, lien, or interest in property or cloud upon title. [¶] (b) ‘Property’ includes real property, and to the extent applicable, personal property.” Code of Civil Procedure section 760.020, subdivision (a), states, “An action may be brought under this chapter to establish title against adverse claims to real or personal property or any interest therein.” The parties do not appear to dispute that Defendant’s third deed of trust is a lien or an interest in the subject property. Since the TAC alleges fraud against other defendants that may support a determination as to the status of the title of the subject property, the TAC adequately pleads a quiet title cause of action against Defendant. A determination of the title of the subject property could affect Defendant’s interest in the property.
Therefore, the court OVERRULES the Demurrer as to the fourth cause of action.
Sixth Cause of Action (Declaratory Relief):
“ ‘The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject.’ [Citation.]” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79 (City of Cotati); Italics in City of Cotati.) “ ‘To qualify for declaratory relief, [a party] would have to demonstrate its action presented two essential elements: “(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to [the party’s] rights or obligations.” ’ [Citation.] (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.) “ ‘ “ ‘The purpose of a declaratory judgment is “to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation.” ’ [Citation.] ‘Another purpose is to liquidate doubts with respect to uncertainties or controversies which might otherwise result in subsequent litigation [citation]’ [Citation.]” [Citation.] “ ‘One test of the right to institute proceedings for declaratory judgment is the necessity of present adjudication as a guide for plaintiff’s future conduct in order to preserve his legal rights.’ ” ’ [Citation.]” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (Osseous) (2010) 191 Cal.App.4th 357, 364-365.)
Since the TAC alleges fraud against other defendants that may support a determination as to the status of the title of the subject property, the TAC adequately pleads a declaratory relief cause of action against Defendant. The controversy regarding the status of the title could affect Defendant’s interest in the property.
Therefore, the court OVERRULES the Demurrer to the sixth cause of action.
Code of Civil Procedure section 430.41, subdivision (e)(1), states, “(e)(1) In response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times, absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action. The three-amendment limit shall not include an amendment made without leave of the court pursuant to Section 472, provided the amendment is made before a demurrer to the original complaint or cross-complaint is filed.”
The Opposition does not request leave to amend and does not offer facts to demonstrate that Plaintiff can cure the defects identified above. Therefore, the court SUSTAINS Defendant’s (American Financial Center, Inc.) Demurrer to Plaintiff Anh Thi Thy song Nguyen, Trustee of Mother Nature Trust’s Third Amended Complaint, filed on 7-26-22 under ROA No. 839, to the fifth cause of action WITHOUT LEAVE TO AMEND. The court OVERRULES the Demurrer to the fourth and sixth causes of action. The court ORDERS Defendant to file an answer to the TAC within 10 days from the date of service of the notice of the court’s ruling.
Plaintiff is to give notice.
Motion No. 2:
Defendant’s (Megan Zucaro) Demurrer to Plaintiff Ahn Thy Song Nguyen, Trustee of Mother Nature Trust’s Second Amended Complaint (Demurrer), filed on 6-6-22 under ROA No. 776, is OFF CALENDAR as MOOT.
JKC3H8 v. Colton (2013) 221 Cal.App.4th 468, 477 states, “ ‘ “[A]n amendatory pleading supersedes the original one, which ceases to perform any function as a pleading.” ’ [Citation.] ‘The amended complaint furnishes the sole basis for the cause of action, and the original complaint ceases to have any effect either as a pleading or as a basis for judgment. [Citation.] [¶] Because there is but one complaint in a civil action [citation], the filing of an amended complaint moots a motion directed to a prior complaint. [Citation.]’ [Citation.] Thus, the filing of an amended complaint renders moot a demurrer to the original complaint. [Citation.]”
On 6-22-22 under ROA No. 795, Plaintiff (Anh Thy Song Nguyen, Trustee of Mother Nature Trust) filed a Third Amended Complaint (TAC). This TAC superseded Plaintiff’s Second Amended Complaint. Since Defendant directs the Demurrer to the Second Amended Complaint, the court finds that the Demurrer is MOOT and takes it OFF CALENDAR.
Plaintiff is to give notice.
Motion No. 3:
Defendant’s (American Financial Center, Inc.) Motion for Sanctions Against Plaintiff Anh Thy Song Nguyen, Trustee of Mother Nature Trust, and its Counsel, Andrew Smits, filed on 5-26-20 under ROA 148, is CONTINUED to 9-27-22 at 9:00 a.m. in Department C32.
The Opposition to the Motion for Sanctions Against Plaintiff Anh Thy Song Nguyen, Trustee of Mother Nature Trust, and its Counsel, Andrew Smits, states, “As of May 18, 2021, attorney Smits has no involvement in this action. For this reason alone, the motion must be denied.” (Opposition, ROA No. 771, 7:3-4.)
The court requests further briefing on whether it has jurisdiction to order sanctions against a prior attorney of record in the case who has substituted out or withdrawn.
Further, the court requests briefing as to whether the court can award sanctions for the filing of the Second and Third Amended Complaints given the Motion only addresses the First Amended Complaint.
The supplemental briefs are due no later than 9-16-22 and are not to exceed five pages. Plaintiff, Andrew Smits, and Defendant, may each file their own brief.
Defendant is to give notice.
Motion No. 4:
Defendant’s (American Financial Center, Inc.) Motion for Monetary Sanctions Against Michael A. Younge and the Law Office of Michael A. Younge, Counsel for Plaintiff, filed on 1-18-22 under ROA 633, is CONTINUED to 9-27-22 at 9:00 a.m.
The court does not order supplemental briefing as to this Motion.
Defendant is to give notice.