Deutsche Bank Nat. Trust v. Pyle ( 2017 )

Filed 7/13/17
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
DEUTSCHE BANK NATIONAL TRUST D071079
COMPANY, as Trustee, etc.,
Plaintiff, Cross-defendant and (Super. Ct. No. PSC1400290)
Respondent,
v.
ALAN PYLE et al.,
Defendants, Cross-complainants and
Appellants.
APPEAL from a judgment of the Superior Court of Riverside County, James T.
Latting and Randall D. White, Judges. Affirmed.
Hennelly & Grossfeld and Ronald K. Giller for Defendants, Cross-complainants
and Appellants.
Parker Ibrahim & Berg, John M. Sorich, Bryant Delgadillo and Mariel Gerlt-
Ferraro for Plaintiff, Cross-defendant and Respondent.
In OC Interior Services, LLC v. Nationstar Mortgage, LLC (2017) 7 Cal.App.5th
1318 (review den. May 10, 2017) (OC Interior) another panel of this court concluded that
a void judgment does not pass title free of the lien purportedly cancelled by the void
judgment; rather, "a void judgment in the chain of title has the effect of nullifying a
subsequent transfer, including a transfer to a purported bona fide purchaser." (Id. at p.
1335.) In this case, the parties seek to avoid a similar result by arguing that a void default
judgment essentially granted quiet title relief. We reject this argument because the void
default judgment did not quiet title to the property.
FACTUAL AND PROCEDURAL BACKGROUND
The Loan and Lender's Acquisition of the Property
In 2004 Denise Saluto recorded a grant deed to real property located in Rancho
Mirage, California (the Property). In 2005 Saluto obtained a $517,000 loan on the
Property secured by a deed of trust (DOT). The DOT identified Saluto as the borrower
and Long Beach Mortgage Company (LBMC) as the lender, beneficiary and trustee.
LBMC later merged with Washington Mutual Bank (WaMu), which then became the
beneficiary of the loan and DOT, as successor in interest to LBMC. In early 2007 Saluto
defaulted on the loan.
Plaintiff Deutsche Bank National Trust Company, as trustee for Long Beach
Mortgage Loan Trust 2005-WL3 (Deutsche Bank) acquired the Property in July 2007 at a
trustee's sale for approximately $510,000, becoming the beneficiary of the loan and DOT.
In August 2007 Deutsche Bank recorded its trustee's deed upon sale (the trustee's deed).
Deutsche Bank sought to gain possession of the Property through an unlawful
detainer action, but Saluto filed for bankruptcy protection. On September 25, 2008,
JPMorgan Chase Bank, N.A. (JPMorgan), acquired certain assets of WaMu from the
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Federal Deposit Insurance Corporation, by and through a purchase and assumption
agreement, including any interest WaMu had in the loan.
The Saluto Action
In February 2009 Saluto, acting in propria persona, sued Deutsche Bank and
WaMu Bank, as successor to LBMC, to cancel, set aside and vacate the trustee's deed and
cancel the DOT. Saluto alleged that she was the lawful owner of the Property free and
clear of the DOT and sought to enjoin Deutsche Bank and WaMu from asserting any
ownership or other legal rights or interest in the Property. Saluto did not allege a quiet
title claim.
On December 15, 2009, the trial court entered a default judgment in favor of
Saluto canceling and setting aside the trustee's deed and DOT, and enjoining Deutsche
Bank and WAMu from asserting any interest in the Property. In March 2010 Saluto
recorded the default judgment. That same month, JPMorgan learned of the default
judgment when Saluto sought to refinance the Property.
In June 2010 Deutsche Bank and JPMorgan (as WaMu's successer in interest) filed
a motion to set aside the default judgment under Code of Civil Procedure1 section 473,
subdivision (b). The trial court denied the motion as untimely. In December 2010
Deutsche Bank and JPMorgan filed a second motion to set aside the default judgment
under section 473.5. The trial court granted the second motion, but this ruling was
reversed on appeal. (Saluto v. Deutsche Bank National Trust Company (Apr. 24, 2012,
1 Undesignated statutory references are to the Code of Civil Procedure.
3
E053221) [nonpub. opn.] (Saluto I).) On July 27, 2012, the decision reinstating the
default judgment became final based on the issuance of a remittitur.
In November 2013 Deutsche Bank and JPMorgan filed a third motion to set aside
the default judgment based on extrinsic fraud, alleging that the proofs of service had been
falsified and they were never served with the summons and complaint. After holding an
evidentiary hearing, the trial court granted the motion finding that Saluto had filed false
proofs of service and Deutsche Bank and JPMorgan had never been served with the
summons and complaint in the Saluto action. On December 3, 2013, the order setting
aside the default judgment was recorded.
Saluto's Fraud and Sale of the Property
Before Deutsche Bank purchased the property in July 2007, Saluto recorded a
number of documents purporting to convey an interest in the property. Saluto recorded
additional documents after Deutsche Bank purchased the property. While the Saluto
action was pending, Saluto recorded more documents and sold the property to defendants.
JPMorgan, its predecessors, or its agent did not authorize any of these documents. We
summarize these interim events here.
In May 2006 a grant deed was recorded conveying title to the Property from
Saluto to SNJ Properties, LLC (SNJ). In November 2006 another grant deed was
recorded, wherein title to the Property was conveyed from SNJ to Atistar Mortgage
Solutions, LLC (Atistar). In February 2007 Atistar conveyed title to the Property back to
SNJ.
4
In July 2007 an "Affidavit & Notice of Dissolution of Trust Deed and Merger of
Trust Deed into Title of Trust Deed Beneficiary" (Affidavit) was recorded, stating that
SNJ transferred its interest in the Property to LBMC and WaMu. The Affidavit
purported to dissolve the DOT, without Deutsche Bank's authorization. That same day,
another grant deed was recorded, whereby SNJ purported to convey title to LBMC and
WaMu.
In August 2007 Deutsche Bank recorded its trustee's deed. In July 2010 a
recorded grant deed purported to convey title to the Property from Saluto to Lillie LTD
(Lille). In September 2010 a grant deed was recorded whereby SNJ purported to convey
title to the Property to Lillie.
In July 2012 a number of documents were recorded in the chain of title that were
not authorized by Deutsche Bank. SNJ purported to convey title in the Property to
Equalizer, LLC (Equalizer). Saluto then purportedly conveyed title from Lillie to
Equalizer. Saluto also purportedly conveyed title in the Property to Equalizer. LBMC
also purportedly conveyed title in the Property to Equalizer. Finally, Atistar purportedly
conveyed title to Equalizer. In net effect, these transfers made it appear that SNJ, Altistar
and LBMC had no interest in the property and that Equalizer had title to the property.
Defendants Cora Broadhurst and her husband, Alan Pyle, became interested in the
Property when it was advertised for sale. Pyle has an MBA and experience in the
financial industry. Broadhurst is a licensed mortgage broker and realtor, although her
licenses may not be currently active. In September 2012 Broadhurst and Pyle entered
into a California residential purchase agreement and joint escrow instructions (the
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Purchase Agreement) with Equalizer under which Equalizer agreed to sell the Property to
Broadhurst and Pyle for $315,000. Under the Purchase Agreement, Equalizer agreed to
disclose all matters known to it affecting title. Additionally, the real estate transfer
disclosure statement required Equalizer, as the seller, to disclose an awareness of "'[a]ny
lawsuits by or against the Seller threatening to or affecting this real property, including
any lawsuits alleging a defect or deficiency in this real property.' " Equalizer responded
to this disclosure obligation marking the box "no." At this time, however, Deutsche Bank
had filed two motions to set aside the default judgment in the Saluto action. Although the
second motion was successful, the ruling was reversed on appeal in April 2012. Thus,
the Saluto action was still ongoing when Broadhurst and Pyle purchased the property.
In October 2012 a grant deed was recorded, wherein Equalizer purportedly
conveyed title in the Property to Broadhurst and Pyle. Saluto executed the grant deed as
a "Member" of Equalizer. Broadhurst and Pyle obtained a loan from defendant FirstBank
in the approximate amount of $225,500 to purchase the Property.2 In November 2013, a
deed of trust (2013 DOT) was recorded which purported to encumber the Property in
favor of FirstBank. The borrowers under the 2013 DOT are Broadhurst and Pyle.
Deutsche Bank did not authorize, consent or ratify the 2013 DOT.
The Instant Action
Deutsche Bank filed this action against defendants for: quiet title, cancellation of
instruments, declaratory and injunctive relief, slander of title, and forcible entry and
2 We collectively refer to Broadhurst, Pyle and FirstBank as defendants.
6
detainer. Defendants filed a cross-complaint seeking, among other things, to quiet title to
the Property in their favor. The parties filed cross-motions for summary judgment or,
alternatively, summary adjudication of issues seeking judgment as to all causes of action
in Deutsche Bank's complaint and the quiet title cross-complaint. Among other things,
Deutsche Bank argued that defendants' claim for quiet title and affirmative defense of
bona fide purchaser or encumbrancer failed as a matter of law.
The trial court denied defendants' motion and granted Deutsche Bank's motion
concluding that defendants did not qualify as bona fide purchasers as a matter of law
based on the void default judgment. The trial court entered a judgment in favor of
Deutsche Bank. Defendants' timely appealed.
DISCUSSION
I. STANDARD OF REVIEW
Summary judgment is appropriate where "the action has no merit or [] there is no
defense to the action or proceeding." (§ 437c, subd. (a)(1).) A party seeking summary
judgment bears the initial burden of making a prima facie showing that no triable issue of
material fact exists. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850
(Aguilar).) If this burden is met, the party opposing the motion bears the burden of
showing the existence of disputed facts. (Ibid.) We independently review the granting of
summary judgment to ascertain whether there is a triable issue of material fact justifying
reinstatement of the action. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32
Cal. 4th 1138, 1142.) The trial court's ruling to grant a summary judgment should be
7
upheld only if no triable issue as to any material fact exists, and the moving party is
entitled to judgment as a matter of law. (Aguilar, at p. 850.)
II. ANALYSIS
A. Impact of Void Default Judgment
In granting Deutsche Bank's motion, the trial court recognized that all claims
alleged by the parties hinged on: (1) whether defendants were entitled to bona fide
purchaser or encumbrancer status, and (2) the impact of the void default judgment in the
chain of title. On appeal, defendants disagree with the trial court's ultimate conclusion on
the above two questions, but essentially concede that resolution of these questions resolve
all claims alleged by the parties. Defendants contend we should reverse the trial court's
ruling granting summary judgment in favor of Deutsche Bank and order that summary
judgment be granted in their favor.
Relying on Garrison v. Blanchard (1932) 127 Cal. App. 616 (Garrison),
defendants assert that a bona fide purchaser of real property is protected from a title
challenge where the purchaser's title is alleged to be invalid because of a void judgment
in the chain of title. They claim other courts have come to the same conclusion, citing,
among other cases, Newport v. Hatton (1924) 195 Cal. 132 (Newport) and Marlenee v.
Brown (1943) 21 Ca1.2d 668 (Marlenee). They also claim that the quiet title statutes
effectively codified the rule in these cases.
Deutsche Bank asserts that the void default judgment was a nullity that had no
effect, even as against a subsequent bona fide purchaser or encumbrancer. It contends
that defendants improperly relied on authority pertaining to quiet title judgments which is
8
inapplicable to the void default judgment at issue because the Saluto action was not a
quiet title case. Because the void default judgment is a nullity, the trial court properly
concluded that defendants are not bona fide purchasers as a matter of law. In the
alternative, Deutsche Bank asserts defendants cannot satisfy the requirements for bona
fide status. Finally, they claim the equities favor it, over defendants.
As a preliminary matter, the elements of a bona fide purchaser are payment of
value, in good faith, and without actual or constructive notice of another's rights.
(Melendrez v. D & I Investment, Inc. (2005) 127 Cal. App. 4th 1238, 1251.) "[A] bona
fide purchaser for value who acquires his interest in real property without notice of
another's asserted rights in the property takes the property free of such unknown rights."
(Hochstein v. Romero (1990) 219 Cal. App. 3d 447, 451.)
In OC Interior Services, supra, 7 Cal.App.5th 1318, another panel of this court
addressed the impact of a void judgment in the chain of title.3 (Id. at p. 1335.) For
purposes of analysis, the OC Interior court assumed that the property purchaser qualified
as a bona fide purchaser for value. (Id. at p. 1331.) Although the facts in OC Interior
were much simpler than the instant action, the essential facts are very similar—a property
owner/borrower, acting in propria persona, obtained a default judgment against the
lender/trust deed holder cancelling the trust deed holder's interest in the property. After
the property owner sold the property, the trust deed holder learned of the default
3 We allowed the parties to file supplemental briefs addressing OC Interior, supra, 7
Cal.App.5th 1318. The parties have done so, and we have considered these submissions.
9
judgment and successfully set it aside as void.4 The OC Interior court concluded that a
void judgment does not pass title free of the lien purportedly cancelled by the void
judgment; rather, "a void judgment in the chain of title has the effect of nullifying a
subsequent transfer, including a transfer to a purported bona fide purchaser." (Id. at p.
1335.) We agree.
Here, when Deutsche Bank acquired the Property it recorded the trustee's deed.
The trustee's deed showing Deutsche Bank's interest in the Property is in the chain of
title, a fact defendants do not dispute. Saluto obtained a default judgment purportedly
cancelling the trustee's deed. She recorded the default judgment in March 2010.
Although the default judgment had the legal effect of eliminating Deutsche Bank's
interest in the Property, the trustee's deed remained in the chain of title. Deutsche Bank
4 In OC Interior a property owner obtained a $2 million loan, secured by a first deed
of trust (First DOT) on his property. (OC Interior, supra, 7 Cal.App.5th at p. 1323.) The
original lender assigned the note and First DOT to another creditor, a securitization trust.
(Ibid.) The property owner defaulted on the loan and, while negotiating with the loan
servicer for a forbearance agreement, sued the original lender to, among other things,
cancel the First DOT. (Ibid.) After the property owner recorded a default judgment in
his favor, the original lender moved to set aside the default judgment on the ground it
never received notice of the action because the property owner served the complaint at its
former address. (Id. at pp. 1323-1324.)
In the meantime, the property owner sold the property to purchaser for half of its
appraised value, with purchaser obtaining title insurance in an amount over the actual
purchase price. (OC Interior, supra, 7 Cal.App.5th at p. 1324.) The purchaser also
obtained a special addendum to the purchase agreement, in which the property owner
represented that he had not engaged in fraud. (Id. at p. 1336.) The original lender
learned of the default judgment and successfully moved to set it aside. (Id. at p. 1324.)
The trustee under the First DOT recorded a notice of trustee sale. (Ibid.) The purchaser
then sued to enjoin the foreclosure. (Ibid.) The trial court granted summary judgment in
favor of the purchaser on the ground that the purchaser qualified as a bona fide purchaser
of the property, taking the property free of the First DOT. (Id. at pp. 1324-1325.) The
trustee appealed.
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filed its first motion to set aside the default judgment in June 2010. Despite a number of
missteps, in November 2013 Deutsche Bank obtained an order setting aside the default
judgment as void on the ground it had never been served with the summons and
complaint in the Saluto action. As the OC Interior court correctly found, a void
judgment is " 'a nullity—past, present and future.' " (OC Interior, supra, 7 Cal.App.5th at
p. 1331.) Thus, the order voiding the default judgment, in legal effect, eliminated the
default judgment from the record. This left Deutsche Bank's trustee's deed in defendants'
chain of title. In end result, defendants are not bona fide purchasers as a matter of law
because they had record notice of Deutsche Bank's trustee's deed.
In reaching its conclusion, the OC Interior court addressed most of the case law
cited by defendants, including Garrison, supra, 127 Cal. App. 616, Newport, supra, 195
Cal. 132 and Marlenee, supra, 21 Ca1.2d 668. Of particular interest is the court's
extensive discussion of Garrison, a case relied on by Deutsche Bank and defendants.5
5 In their supplemental brief defendants argue they are entitled to bona fide status
protection because this action constitutes a collateral attack by Deutsche Bank on Saluto's
default judgment which appeared valid on the face of the record. Defendants are
mistaken. The instant action does not challenge the default judgment. Saluto did not
appeal the ruling declaring the default judgment void and defendants do not dispute that
the default judgment is void; rather, they contest the legal effect of the void default
judgment in the chain of title.
Defendants also argue that the fact pattern in Garrison "is nearly identical to the
fact pattern here" because they did not receive notice of the action in which the default
judgment was set aside. We disagree. Garrison addressed three separate actions, two of
which sought to quiet title. (Garrison, supra, 127 Cal.App. at p. 618.) In Garrison the
final purchaser of the property did not receive notice of the order vacating a default
judgment or a quiet title judgment even though the entity that obtained the order vacating
the default judgment and the quiet title judgment knew of the purchaser's interest in the
property. (Id. at pp. 619, 621.) As the OC Interior court explained, Garrison came to the
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(OC Interior, supra, 7 Cal.App.5th at pp. 1333-1335.) For brevity's sake, it is not
necessary of us to reiterate this discussion as we agree with the ultimate conclusion in OC
Interior that a void judgment in the chain of title does not pass title free of the lien
purportedly cancelled by the void judgment. Defendants contend that the quiet title
statutes should apply because Saluto obtained quiet title relief. Specifically, defendants
rely on section 764.060 to argue "where a party purchases real property for value in
reliance on a quiet title judgment without notice of any defects or irregularities in the
judgment or the case in which the judgment was entered, the party's rights cannot be
impaired even if the quiet title judgment is later successfully directly or collaterally
attacked." The OC Interior court touched on a similar argument. (See OC Interior at p.
1334 & fn. 6.) We expand on this discussion, addressing the difference between quiet
title relief and cancellation of instruments, to show that defendants cannot rely on the
quiet title statutes.
Civil Code section 3412 provides 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 obtain cancellation under this section, a
plaintiff must allege the instrument is "void or voidable" and would cause "serious
correct conclusion in favor of the purchaser noting that the under the current quiet title
statutory scheme a judgment is not effective against a person with a recorded claim at the
time the judgment is recorded who is not made a party to the action. (OC Interior, supra,
7 Cal.App.5th at p. 1334, citing § 764.045.) As we discuss post, the Saluto action did not
seek quiet title relief and defendants cannot rely on protections afforded under the quiet
title statutory scheme.
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injury" if not canceled. (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245
Cal. App. 4th 808, 818-819.) Cancellation of an instrument is essentially a request for
rescission of the instrument. (Bank of America v. Greenbach (1950) 98 Cal. App. 2d 220,
228.) The effect of a decree cancelling an instrument is to place the parties where they
were before the instrument was made, as if it had never been made. (Id. at p. 238.)
An action to cancel an instrument is distinct from an action to quiet title. (Hyatt v.
Colkins (1917) 174 Cal. 580, 581.) Where a complaint seeks to quiet title to real property
and cancel an instrument and both claims are based on the same facts, it is said that the
cancellation claim is incidental to the claim to quiet title such that the action asserts only
one claim. (Ephraim v. Metropolitan Trust Co. (1946) 28 Cal. 2d 824, 833.) Stated
differently, a complaint alleging facts authorizing relief both to quiet title and to cancel
an instrument may state but one cause of action, "this does not mean that the cause of
action is necessarily one to quiet title. Quieting title is the relief granted once a court
determines that title belongs in plaintiff. In determining that question, where a contract
exists between the parties, the court must first find something wrong with that contract.
In other words, in such a case, the plaintiff must show he has a substantive right to relief
before he can be granted any relief at all. Plaintiff must show a right to rescind before he
can be granted the right to quiet his title." (Leeper v. Beltrami (1959) 53 Cal. 2d 195,
216.)
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." (Peterson v. Gibbs
13
(1905) 147 Cal. 1, 5.) 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.) "[U]nlike the ordinary default prove-up, in which a defendant has no right
to participate [citation], before entering any judgment on a quiet title cause of action the
court must 'in all cases' 'hear such evidence as may be offered respecting the claims of
any of the defendants.' " (Harbour Vista, LLC v. HSBC Mortgage Services Inc. (2011)
201 Cal. App. 4th 1496, 1502, italics omitted.)
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A quiet title judgment does not bind a nonparty whose interest was of record prior
to the filing of the lis pendens or, if no lis pendens was filed, at the time the judgment
was recorded. (§ 764.045, subd. (a).) Nor does the judgment bind a nonparty whose
interest was actually known to the plaintiff at the time of the lis pendens or, if no lis
pendens was filed, "at the time the judgment was entered. Nothing in this subdivision
shall be construed to impair the rights of a bona fide purchaser or encumbrancer for value
dealing with the plaintiff or the plaintiff's successors in interest." (§ 764.045, subd. (b).)
Where a party purchases real property for value in reliance on a quiet title judgment
without notice of any defects or irregularities in the judgment or the case in which the
judgment was entered, the party's rights cannot be impaired even if the quiet title
judgment is later successfully directly or collaterally attacked. (§ 764.060.) The purpose
of this statute is to enhance the marketability of property as to which a quiet title decree
has been rendered by relegating the plaintiff to a damage remedy. (Cal. Law Revision
Com. com., 17A1 West's Ann. Code Civ. Proc. (2015 ed.) foll. § 764.060, p. 453.)
Here, Saluto did not allege a quiet title claim. Rather, she claimed that Deutsche
Bank and WaMu had wrongfully foreclosed on the Property and she was entitled to
cancellation of the trust deed because she had properly rescinded her loans under the
Truth in Lending Act (15 U.S.C. §§ 1601-1666) by mailing a notice of rescission and
tendering the original principal amount of the loans. Saluto sought an injunction
restraining Deutsche Bank and WaMu from asserting any ownership or other legal rights
or interest in the Property.
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In her ex parte application for a default judgment against Deutsche Bank and
WaMu, Saluto specifically notified the court: "THIS IS NOT A QUIET TITLE CASE
AND DOES NOT REQUIRE A COURT HEARING." Saluto obtained a default
judgment canceling and voiding the foreclosure and trustee's deed, and permanently
enjoining Deutsche Bank and WaMu from asserting any ownership or lien interest in the
Property. The default judgment did not quiet title.6
Defendants' incorrectly claim that Saluto "obtained quiet title relief" and "all
requirements of section 764.060 were satisfied." Accordingly, even assuming defendants
qualify as bona fide purchasers, defendants cannot benefit from section 764.060, which
provides "[t]he relief granted in an action or proceeding directly or collaterally attacking
the judgment in the action, whether based on lack of actual notice to a party or otherwise,
shall not impair the rights of a purchaser or encumbrancer for value of the property acting
in reliance on the judgment without knowledge of any defects or irregularities in the
judgment or the proceedings." Without citing any authority, the Miller & Starr treatise
comments that the provisions of section 764.060 "may serve as a useful summary of what
the effect of a judgment ought to be in actions other than quiet title proceedings, even if
the existing case law is somewhat confused and inconsistent for such other actions." (4
Miller & Starr, Cal. Real Estate (4th ed. 2016) § 10-147, p. 10-508.) We decline to apply
6 The appellate court in Saluto I incorrectly stated that Saluto's complaint included a
claim to quiet title. This mistake was of no consequence as the appellate court did not
rely on the quiet title statutes in deciding the matter before it.
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the rule of section 764.060 to a non-quiet title judgment as such judgments lack the
statutory protections governing quiet title actions.
Finally, both parties assert the equities support their position. We conclude that
the equities favor Deutsche Bank. After Saluto defaulted on her loan Deutsche Bank
obtained a trustee's deed and became the owner of the Property after paying
approximately $510,000 at a trustee's sale for the Property. Deutsche Bank had no
knowledge of Saluto's subsequent fraud. In contrast, before the sale transaction with
Equalizer closed, Broadhurst received a copy of the default judgment and discussed it
with Pyle. The default judgment clearly indicated that Saluto was acting in propria
persona. After reading the default judgment Broadhurst was "astonish[ed]" to see that it
set aside Saluto's mortgage. Broadhurst was aware that Equalizer had acquired its title
from Saluto. Broadhurst and Pyle paid Equalizer $315,000 for the Property, about
$195,000 less than Deutsche Bank paid at the trustee's sale. The grant deed Broadhurst
and Pyle obtained from Equalizer revealed that Saluto was a member of Equalizer.
Broadhurst asked the title insurer to explain the default judgment and was told that
because the default judgment had been entered about three years earlier they could rely
on it and the title insurer was "prepared to issue title insurance."
Additionally, documents in the chain of title revealed numerous transfers of the
Property. For example, in July 2007 a recorded Affidavit purported to dissolve Deutsche
Bank's DOT. The following month, however, Deutsche Bank recorded its trustee's deed.
After Saluto obtained the void default judgment in December 2009, Saluto purportedly
transferred her interest in the property to Lillie in July 2010. In July 2012, Saluto and
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two entities with Saluto as a managing member or partner (SNJ and Lillie), purportedly
transferred their interest in the Property to Equalizer, an entity also controlled by Saluto.
Based on the totality of the circumstances, Broadhurst was on inquiry notice of possible
title defects.
Defendants' remedy is through their title insurer. The title insurer made a business
decision to issue title insurance knowing Saluto prosecuted her action and obtained the
default judgment acting in propria persona, Equalizer had acquired its title from Saluto,
Saluto was a member of Equalizer, and Equalizer sold the Property to Broadhurst and
Pyle. The default judgment, on its face, did not grant quiet title relief. The title insurer
could have reviewed the court file for the Saluto action and easily ascertained that
Deutsche Bank was attempting to have the default judgment set aside and the litigation
was on going. Instead, the title insurer apparently relied on the age of the default
judgment in deciding to issue title insurance. A void judgment, however, can be set aside
at any time. (§ 473, subd. (d); Falahati v. Kondo (2005) 127 Cal. App. 4th 823, 830 ["[a]
void judgment can be attacked at any time by a motion under Code of Civil Procedure
section 473, subdivision (d)"].)
Finally, defendants fault Deutsche Bank for not filing a lis pendens on the
Property. This argument ignores that the default judgment enjoined Deutsche Bank from
asserting any ownership or lien interest in the Property. Deutsche Bank could not file a
lis pendens. Had Deutsche Bank done so, Saluto would have immediately moved to
expunge it based on the default judgment eliminating Deutsche Bank's interest in the
property. (§ 405.32 [A lis pendens may be expunged if "the claimant has not established
18
by a preponderance of the evidence the probable validity of the real property claim."].)
Defendants also claim they had no obligation to check the court records to determine the
status of the Saluto action. This argument ignores that the default judgment was recorded
and provided notice of the Saluto action. (Gov. Code, § 27282, subd. (a)(1); Strutt v.
Ontario Sav. & Loan Assn. (1970) 11 Cal. App. 3d 547, 555 ["judgments directly affecting
the title to real property do not constitute constructive notice unless recorded in the office
of the recorder"].) Thus, defendants were on inquiry notice of what a review of the
Saluto action would have revealed. (First Fidelity Thrift & Loan Assn. v. Alliance Bank
(1998) 60 Cal. App. 4th 1433, 1443 ["A person generally has 'notice' of a particular fact if
that person has knowledge of circumstances which, upon reasonable inquiry, would lead
to that particular fact."].) The " 'recording laws were not enacted to protect those whose
ignorance of the title is deliberate and intentional.' " (Melendrez v. D & I Investment, Inc.
(2005) 127 Cal. App. 4th 1238, 1252.)
B. Impact of the Void Judgment on the Causes of Action Alleged by the Parties
Defendants rely on the void default judgment to support their argument that the
trial court erroneously granted summary judgment in favor of Deutsche Bank because
Deutsche Bank cannot prevail on the claims alleged in its complaint. As addressed
above, the void default judgment does not support defendants' claim to title.
As to Deutsche Bank's claim for slander of title, defendants make the additional
argument that Deutsche Bank cannot prevail on this claim because Deutsche Bank failed
to present evidence showing defendants' made the statement disparaging Deutsche Bank's
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title without malice.7 Nonetheless, should we reject their primary argument regarding
the validity of their title, defendants request that the ruling in favor of Deutsche Bank on
the slander of title cause of action be affirmed because the court awarded no damages
against defendants. We affirm summary adjudication of this claim, as requested by
defendants, without addressing the merits of their argument.
In summary, the judgment in favor of Deutsche Bank is affirmed. This renders
moot the remaining arguments regarding defendants' motion and the court's ruling on
evidentiary objections.
DISPOSITION
The judgment is affirmed. Deutsch Bank is entitled to its costs on appeal.
NARES, J.
WE CONCUR:
McCONNELL, P. J.
O'ROURKE, J.
7 The elements of a cause of action for slander of title are (1) a publication, which is
(2) without privilege or justification and thus with express or implied malice, (3) false,
either knowingly so or made without regard to its truthfulness and (4) causes pecuniary
loss. (Howard v. Schaniel (1980) 113 Cal. App. 3d 256, 263-264.)
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