Judge Yolanda Orozco, Case 21STCV44465 2022-12-13 Tentative Ruling

Judge: Yolanda Orozco, Case: 21STCV44465, Date: 2022-12-13 Tentative Ruling

Case Number: 21STCV44465 Hearing Date: December 13, 2022 Dept: 31

DEMURRER WITH MOTION TO STRIKE COMPLAINT

tentative ruling

The demurrer is OVERRULED as to the third cause of action for Slander of Title and SUSTAINED WITH LEAVE TO AMEND as to the sixth cause of action for negligent infliction of emotional distress.

The Motion to Strike is GRANTED WITH LEAVE TO AMEND as to paragraph 72 and DENIED as to paragraphs 47 and 48 of Plaintiff’s Complaint.

Background

On December 06, 2021, Plaintiff U.S Bank National Association, as Trustee for Velocity Commercial Capital Loan Trust 2019-3 (hereinafter “U.S. National Bank”) filed a Complaint against Sannette Gite, as Trustee of the Vaught Family Trust; Yong Hwa Chung, Jung Hyun Park, et al. The Complaint asserts causes of action for:

1) Quiet Title; and

2) Declaratory Relief

On August 03, 2022, Sannette Gite filed a Cross-Complaint against U.S. National Bank, Mara Enterprises (“Mara”), Estate of Yong Hwa Chung; et al. The Cross-Complaint asserts causes of action for:

1) Quiet Title; and

2) Declaratory Relief

3) Slander of Title

4) Fraud

5) Intentional Infliction of Emotional Distress (IIED)

6) Negligent Infliction of Emotional Distress (NIED)

7) Implied Equitable Indemnity

On October 24, 2022, Plaintiff/Cross-Defendant U.S. National Bank filed a demurrer with a motion to strike Defendant/Cross-Complainant Sannette Gite's Cross-Complaint (hereinafter “Cross-Complainant”).

Cross-Complainant filed opposing papers on November 30, 2022. U.S. National Bank filed a reply on December 07, 2022.

MEET AND CONFER¿

Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading. (Code Civ. Proc., §§ 430.41, 435.5.) “Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (Code Civ. Proc., § 430.41, subd. (a)(4).)¿

The meet and confer requirement has been met. (Scott Decl. ¶¶ 2, 3, Ex. 1.)

Legal Standard

A. Demurrer¿¿

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable.¿ (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿ “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.”¿ (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)¿ For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)¿ A demurrer “does not admit contentions, deductions or conclusions of fact or law.”¿ (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿

B. Motion to Strike¿

Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (Code of Civ. Proc., § 435(b)(1); Cal. Rules of Court (CRC), Rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code of Civ. Proc., § 436, subds. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)¿¿

C. Leave to Amend¿¿

“Where the defect raised by a motion to strike or by demurrer is reasonably capable of cure, leave to amend is routinely and liberally granted to give the plaintiff a chance to cure the defect in question.” (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿

Discussion

I. Demurrer to 3rd and 6th COA

Allegations in Cross-Complaint

This case involves a dispute over ownership of the subject property located in Los Angeles, California. (X-Comp. ¶ 1.) Title of the property was held by grant deed by Luerendia Vaughn as of November 6, 1997. (Id. ¶ 14, Ex. 1.) Cross-Complainant came to possess the subject property in April 18, 2022, when Cross-Complainant was substituted as Trustee for Luerendia Vaughn.

Plaintiff/Cross-Defendant U.S. National Bank demurrer to Plaintiff’s third and sixth causes of action. (Id. ¶ 15.) Cross-Complainant asserts she has paid all property taxes on the property since the time she has been in possession of the property as the trustee. (Id. ¶ 16.)

On May 19, 2020, an Amended Judgment in the Los Angeles Superior Court case, No. BC692757, was recorded with the Los Angeles County Recorder’s Office as Instrument No. 20200546718, wherein Quiet Title was granted in favor of Cross-Complainant. (X-Comp. ¶ 26, Ex. 10.) Plaintiff alleges that Cross-Defendants Mara Enterprises (“Mara”) and U.S. National Bank argue that no lis pendens was filed in case No. BC692757 and Mara’s December 30, 2019 Deed of Trust (Exhibit 9) and Velocity Commercial Capital, LLC’s July 18, 2019 Deed of Trust, Security Agreement, and Assignment of Lease, Rents, and Profits and Fixture Filing (Exhibit 7), recorded prior to the time the Quiet Title Judgment was entered and recorded, are not binding on them. (X-Compl. ¶ 27.)

Cross-Complainant alleges that Judgment for Possession (Exhibit 3) was recorded in the Los Angeles County Recorder’s Office as Instrument No. 20161312906, three years prior to any subsequent recording by Cross-Defendants. (Id.) Accordingly, Cross-Defendant had inquiry notice of Cross-Complainant’s ownership interest.

Cross-Defendant U.S. National Bank now demurrers to Cross-Complainant’s third cause of action for “Slander of Title” and sixth cause of action for “Negligent Infliction of Emotional Distress.”

3rd COA: Slander of Title

In order to adequately plead a cause of action for slander of title, a Plaintiff must allege: (1) a publication; (2) which is without privilege or justification and thus with malice, express or implied; (3) is false, either knowingly so or made without regards to its truthfulness, and (4) cause direct and immediate pecuniary loss. (Howard v. Schaniel (1980) 113 Cal.App.3d 256, 263-264.)

Cross-Complainant alleges that Cross-Defendants should have known that the published disparaging documents filed by Cross-Defendants clouded Cross-Complainant’s legal title to the property and were defamatory. (X-Comp. ¶¶ 42, 43, Ex. 5-9.) Cross-Complainant was damaged due to expenses incurred to clear title to the subject property and the humiliation, mental anguish, anxiety, depression, and emotional and physical distress due to Cross-Defendant’s action. (Id. ¶¶ 45, 46.) In particular, “Cross-Defendants conduct creating and recording Exhibits 5 and 6, were fraudulent, oppressive, and malicious. (X-Comp. ¶ 48.)

U.S. National Bank entered into an Assignment of Deed of Trust wherein Velocity assigned the beneficial interest of the Deed of Trust in the amount of $960,000.00 to U.S. National Bank as trustee Velocity Commercial Loan Trust 2019-3. Cross-Complainant argues that a minimal inquiry search would have shown there was another action for Quiet Title pending against multiple defendants, including Cross-Defendants Chung and Jung Hyun Park that found in favor of Cross-Complainant along with a Judgment of Possession that should have put U.S. National Bank on notice of Cross-Complainant’s ownership interest and the nature of her claims of ownership.

U.S. National Bank first argues that Defendant Gitte has not sufficiently plead malice to support a cause of action for Slander of Title. Cross-Complainant can maintain a cause of action for Slander of Title under “implied malice.” (Contra Costa County Title Co. v. Waloff (1960) 184 Cal.App.2d 59, 66.) “Slander of title is effected by one who without privilege publishes untrue and disparaging statements with respect to the property of another under such circumstances as would lead a reasonable person to foresee that a prospective purchaser or lessee thereof might abandon his intentions. (Citation.) It is an invasion of the interest in the vendibility of property. In order to commit the tort actual malice or ill will is unnecessary.” (Phillips v. Glazer (1949) 94 Cal.App.2d 673, 677.)

Cross-Complainant has sufficiently pled that U.S. National Bank, by accepting the assignment of the wrongfully recorded Deed of Trust (Exhibits 8 of the Cross-Complaint) from Velocity, it was foreseeable that U.S. National Bank would acquire an interest in the subject property that would cloud Cross-Complainant’s title to the subject property. Moreover, Cross-Complainant has sufficiently alleged that the recording of the Deed and subsequent assignment were without privilege because Defendant knew or should have known about the Judgment of Possession and the prior Quiet Title actions in favor of Cross-Complainant. (X-Comp. ¶¶ 17-22, Ex. 2-6.) “To be disparaging a statement need not be a complete denial of title in others, but may be any unfounded claim of an interest in the property which throws doubt upon its ownership.” (Phillips, supra, (1949) 94 Cal.App.2d 673, 677.)

Here, Cross-Complainant has stated sufficient facts to allege that U.S. National Bank had constructive notice that Cross-Complainant was the true owner of the subject property via the Judgment of Possession recorded on October 25, 2016. (X-Comp. ¶¶ 19, 27 Ex. 3.) “Constructive notice of a lien or other interest in property arises from the proper recording of that interest.” (Vasquez v. LBS Financial Credit Union (2020) 52 Cal.App.5th 97, 108.) “Every duly recorded conveyance of real property, or recorded judgment affecting title to or possession of real property, is constructive notice of the contents thereof to subsequent purchasers and mortgagees from the time of recordation. By the same token, any conveyance of real property is void as against any prior recorded judgment affecting the title.” (In re Marriage of Cloney (2001) 91 Cal.App.4th 429, 437.)

Based on the allegation that U.S. National Bank had constructive notice of the Judgment of Possession, Cross-Complainant has alleged sufficient facts to support a finding that U.S. National Bank acted with actual malice in accepting the assignment of the Deed of Trust from Velocity. Actual malice requires “a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights.” (Sanborn v. Chronicle Pub. Co. (1976) 18 Cal.3d 406, 413 [internal citations omitted].) Here, Cross-Complainant has sufficiently alleged that U.S. National Bank and all other Cross-Defendants should have known or had constructive notice, via the Judgment of Possession, that Cross-Complainant was the rightful owner, and that U.S. National Bank acted with reckless disregard for Cross-Complainant’s right when it accepted the assignment of the recorded deed from Velocity. (X-Comp. Ex. 7, 8.)

Whether U.S. National Bank accepted the assignment by mistake and without malice or whether there was a failure to record a lis pendens as to LASC Case No. BC692757, are matters outside of the pleadings and not subject to adjudication on a demurrer. In ruling on a demurrer, the defects must appear on the face of the pleading. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Therefore, the Court finds that Cross-Complainant has pled sufficient facts to show actual or implied malice to support a cause of action for Slander of Title against U.S. National Bank.

In addition, U.S. National Bank’s acceptance of the assignment of Velocity’s recorded Deed of Trust can also be deemed ratification of Velocity’s alleged Slander of Title. (See Rakestraw v. Rodrigues (1972) 8 Cal.3d 67, 72–73.) Cross-Complainant has sufficiently alleged that U.S. National Bank is an agent or in partnership with Velocity and other Cross-Defendants when they acted to slander Cross-Complainant’s title to the subject property. (X-Comp. 11.) Lastly, U.S. National Bank may be held liable for accepting the assignment if the acceptance of the assignment was to aid, cooperate, and assist Velocity under a theory of conspiracy. (See Black v. Sullivan (1975) 48 Cal.App.3d 557, 567.) Here, the fact that Cross-Complainant alleged an agency/partnership relationship with Velocity is sufficiently pled to extend liability to U.S. National Bank for accepting the assignment of Velocity’s Recorded Deed of Trust. (X-Comp. Ex. 7, 8.)

Accordingly, the demurrer is OVERRULED as to the third cause of action.

6th COA: Negligent Infliction of Emotional Distress (NIED)

California courts have repeatedly recognized that Negligent Infliction of Emotional Distress (NIED) is not an independent tort, but the tort of negligence such that the traditional elements of duty, breach of duty, causation, and damages apply. (See, e.g., Spates v. Dameron Hospital Association (2003) 114 Cal.App.4th 208, 213; Marlene F. v. Affiliated Psychiatric Medical Clinic, Inc. (1989) 48 Cal.3d 583, 588.) Emotional distress damages are generally not authorized in cases other than that of physical injury. (See Branch v. Homefed Bank (1992) 6 Cal.App.4th 793, 800.) “[D]amages for mental suffering and emotional distress are generally not recoverable in an action for breach of an ordinary commercial contract in California. (Erlich v. Menezes (1999) 21 Cal.4th 543, 558.) “Recovery for emotional disturbance will be excluded unless the breach also caused bodily harm or the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result.” (Id., citing Rest.2d Contracts, § 353.)

The Cross-Complaint alleges that Cross-Defendants acted negligently. Cross-Defendants Yong Hwa Chung and Jung Hyan Park, acted negligently in conveying the subject property to decedent Yong Hwa Chung while a Quiet Title Action was pending. (X-Comp. ¶ 22, Ex. 4, 6.) Subsequently, a Deed of Trust, Security Agreement, Assignment of Leases, Rents, and Profits, and Fixture Filing was recorded in the amount of $960,000.00 between Trustor Yong Hwa Chung and Trustee T.D. Service Company and naming Velocity as a beneficiary. (Id. ¶ 23, Ex. 7.) Velocity subsequently recorded a deed of trust and assigned the beneficial interest to U.S. National Bank. (Id. ¶ 24, Ex. 7, 8.)

Cross-Complainant asserts it can maintain a cause of action for NIED against U.S. National Bank based on agency theory since Cross-Defendant breached a duty in failing to exercise ordinary care in recording documents that they knew or should have known were false and subsequently recording them in a malicious manner that caused emotional distress to Cross-Complainant. (X-Comp. ¶ 47, 68.) The damages include lost wages and emotional distress including humiliation and mental anguish. (Id. ¶ 70.)

When emotional distress is based on the plaintiff’s status as a direct victim the threshold question to ask is whether there has been a preexisting, consensual relationship between the emotionally distressed plaintiff and the allegedly offending defendant. If not, the plaintiff is not in the class of persons who have a protected interest in being free of the negligent infliction of emotional distress. (Bro v. Glaser (1994) 22 Cal.App.4th 1398, 1399.) Although Cross-Complainant has plead that an agency relationship exists between the Cross-Defendants, the relationship between Cross-Defendant and U.S. National Bank must be “consensual” and Cross-Complainant has failed to allege that it had a pre-existing consensual relationship with U.S. National Bank such that it imposes on U.S. National Bank an obligation to act with due care towards Cross-Defendant. (See Lawson v. Management Activities, Inc. (1999) 69 Cal.App.4th 652, 653–655 [“If the plaintiff claims direct victim status, [the] requirement that there be both a preexisting consensual relationship between the parties (Citation) and the defendant's conduct reach a certain level of outrageousness.”].

Here, Cross-Complainant does not articulate a legal theory that would impose a consensual pre-existing relationship between Cross-Complainant and U.S. National Bank that would give rise to a legal duty.

Therefore, the demurrer is SUSTAINED WITH LEAVE TO AMEND, as to the sixth cause of action.

II. Motion to Strike Punitive Damages

Defendant moves to strike Plaintiff’s request for punitive damages as alleged in paragraphs 47, 48, and 72 in their entirety.

To state a claim for punitive damages under Civil Code section 3294, a plaintiff must allege specific facts showing that the defendant has been guilty of malice, oppression, or fraud. (Smith v. Superior Court (1992) 10 Cal. App. 4th 1033, 1042.) The basis for punitive damages must be pled with specificity; conclusory allegations devoid of any factual assertions are insufficient. (Id.) “Malice” is defined in section 3294(c)(1) as “conduct which is intended by the defendant to cause injury” or “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” “Oppression” is defined in section 3294(c)(2) as “despicable conduct subjecting a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id.) The term “despicable” has been defined in the case law as actions that are “base,” “vile,” or “contemptible.” (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal. App. 4th 847, 891.)

Since the demurrer is OVERRULED as to the third cause of action, the Motion to Strike is DENIED as to paragraphs 47, and 48 because Plaintiff has pled sufficient fact to allege actual malice by U.S. National Bank.

The Motion to Strike is GRANTED as to paragraph 72 with LEAVE TO AMEND.

Conclusion

The demurrer is OVERRULED as to the third cause of action for Slander of Title and SUSTAINED WITH 30 days LEAVE TO AMEND as to the sixth cause of action for negligent infliction of emotional distress.

The Motion to Strike is GRANTED WITH 30 days LEAVE TO AMEND as to paragraph 72 and DENIED as to paragraphs 47 and 48 of Plaintiff’s Complaint.

Moving party to give notice.