Dupree v. CIT Bank ( 2023 )

Filed 5/31/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
ERIC DUPREE, as Trustee, etc.,
Plaintiff and Appellant, A163903
v. (Del Norte County Super. Ct.
CIT BANK, N.A., et al., No. CVUJ-2017-1050)
Defendants and Respondents.
I. INTRODUCTION
Before daily life in this country froze on November 22, 1963 at
1:38 p.m. Central Time when the tragic news from Dallas came across the
airwaves—or perhaps later that day, which would confirm that our courts
always remain open, even in times of crisis—a minor event of little note
occurred here in California: A First District Court of Appeal, Division One
panel filed its opinion in Oliver v. Swiss Club Tell (1963) 222 Cal.App.2d 528(Oliver). Nearly 60 years later, the events in Dealey Plaza on the day Oliver
was filed continue to reverberate through history. This case shows that
Oliver, too, is still having ripple effects, here in an obscure corner of
California civil procedure.
Oliver was, in many respects, a routine summary judgment appeal.
But it arose in an odd posture because there was evidence in the record that
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the only defendant that was a party to the appeal, an unincorporated
association, had been merged out of existence in 1934, more than two decades
before the case was filed in 1958. That raised a novel, largely evidentiary
question: Did statements in an answer filed on behalf of an apparently
nonexistent entity operate as a binding admission of the entity’s existence,
even though the lawyers who filed the answer later sought to withdraw from
the case and filed an affidavit saying their client did not exist, pointing to
publicly filed dissolution records to prove that fact?
To the Oliver panel, it was a matter of “common sense” that “courts sit
to settle disputes between existing parties and when the defendant is not a
legal person no lawful judgment can be rendered against [it].” (Oliver, supra,
222 Cal.App.2d at p. 538.) All proceedings in such a case are void ab initio,
the court declared. (Id. at p. 537.) But the panel declined to address whether
an amendment substituting a successor corporation would be allowed, since
no request for such an amendment had been made in the trial court. (Ibid.)
And the panel’s bottom-line holding was narrow: There was a triable issue of
fact as to whether the named defendant continued to exist, so the case was
remanded for trial. (Id. at pp. 545-546.)
In this case, the unaddressed question in Oliver whether an
amendment should be allowed to substitute a new party—here, we have a
lawsuit that was mistakenly brought in the name of the Jo Redland Trust
(the Trust), and the proposed amendment would substitute Eric Dupree, a
successor trustee, as plaintiff—is squarely presented. Relying on the void ab
initio language in Oliver, the trial court ruled it had no power to allow a
curative amendment substituting Dupree for the Trust. Since the complaint
was a nullity from inception, the court ruled, Dupree could not rely on the
2
“relation back” doctrine to avoid a statute of limitations bar, thus rendering
the proposed amendment legally futile and unjustifiably late.
We reject this reading of Oliver and will reverse. We agree that a
judgment entered for or against a nonexistent entity is unenforceable. That
inarguable principle, however, is just a starting point. It does not answer the
precise question before us: When a plaintiff mistakenly brings a lawsuit in
the name of someone unrecognized in law as a legal “person” and the
oversight goes unnoticed until several years into the proceedings, should we,
by legal fiction, treat everything that happened in the course of the lawsuit as
if it never occurred—including the filing of the complaint itself—thereby
depriving the court of power to allow a curative amendment prior to entry of
judgment?
We think not. The complaint in this case was not a nullity as filed.
The trial court had jurisdiction in the fundamental sense—that is, it was
empowered to hear and decide the type of claims alleged. Although
intervener Mortgage Assets Management LLC (MAM LLC) raised a
legitimate question as to whether the Trust has any independent legal
existence separate from Dupree—a potentially fatal jurisdictional defect—the
defect was easily curable by allowing Dupree to substitute into the case by
amendment under Code of Civil Procedure section 473, subdivision (a)(1).
The court could have, and on this record should have, followed the traditional
default rule that amendments to a complaint should be liberally allowed.
II. BACKGROUND
In 2006, the late Jo Redland, then age 83, obtained a reverse mortgage
line of credit from a lender known as Financial Freedom Senior Funding
(FFSF), a subsidiary of IndyMac Bank. The line of credit was secured by two
parcels of property described by metes and bounds in an exhibit to the
mortgage deed of trust. Redland’s house was situated on one parcel (Parcel
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One), a .58-acre plot of land. The other parcel (Parcel Two), 9.4 acres in size,
was adjacent to Parcel One.
The borrower on this reverse mortgage line of credit and the owner of
Parcels One and Two was the Trust, a legal entity organized under the
authority of the Probate Code to hold and manage assets for Redland’s
benefit during her lifetime. Redland, the trustee of the Trust, passed away in
2015. At that point, Eric Dupree, an attorney and Redland’s nephew, became
the successor trustee of the Trust.
The line of credit did not require repayment from Redland during her
lifetime, but by its terms her death constituted a maturity event that allowed
FFSF to accelerate the repayment of the then-outstanding debt, demand
immediate payment from her estate, and if the heirs did not repay the
outstanding indebtedness in full, to initiate foreclosure proceedings.
After a series of bank failures, corporate acquisitions, and assignments,
CIT Bank succeeded to the interests of FFSF in the line of credit loan and the
deed of trust securing it; MAM Inc. succeeded to the interests of CIT Bank in
the loan and deed of trust; and MAM LLC undertook the role of loan servicer.
After Redland died, MTC Financial, a successor trustee under the deed
of trust, sought to foreclose on both Parcel One and Parcel Two. In February
2017, two days before the nonjudicial foreclosure sale was scheduled to take
place, the Trust, represented by Dupree as counsel, filed a complaint alleging
that the line of credit loan is only secured by one of the two Parcels.
The complaint named FFSF and MTC Financial as defendants
(apparently by mistake, since under assignments they had been succeeded by
other entities at that point). Seeking declaratory relief and asking the court
to quiet title, the complaint alleged that the line of credit loan is secured only
by Parcel Two, and not Parcel One (another apparent mistake because this
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allegation conflicted with two lis pendens notices Dupree filed against both
Parcels One and Two).
In August 2018, the Trust filed an amended complaint, adding CIT
Bank as a defendant, and alleging that the line of credit loan is secured only
by Parcel One, and not by Parcel Two. The amended complaint also pleaded
a cause of action for reformation of the deed of trust to reflect the alleged true
intent to encumber only Parcel One. Along with the filing of the amended
complaint, Dupree filed an amended notice of lis pendens against Parcel One
only.
In February 2019, CIT Bank filed a cross-complaint, naming the Trust
as cross-defendant and seeking reformation and a declaration quieting title.
CIT Bank alleged that, on its face, the deed of trust is clear that Redland and
FFSF intended both Parcel One and Parcel Two to be security for the line of
credit loan.
Alternatively, CIT Bank alleged that the deed of trust should be
reformed in its favor and that the court should declare that the Parcel One
security includes an appurtenant right-of-way easement. Without such an
easement, CIT Bank alleged, Parcel One would be landlocked, since there is
no other access to Redland’s house from a nearby state highway.
In September 2020, MAM LLC filed an unopposed motion to intervene,1
along with a motion to expunge the notices of lis pendens. In its motion to
expunge, MAM LLC took the position that the Trust has no probable chance
of success on the merits. Thus, MAM LLC argued, under Code of Civil
Procedure sections 405.31–405.32 it is entitled to expungement. In support
According to a declaration supporting MAM LLC’s motion to
1
intervene, “Since CIT no longer has any interest in the [line of credit loan]
and [MAM LLC] is the current servicer, [MAM LLC] has moved to intervene
in this Action to defend its interest in the property.”
5
of this motion, MAM LLC presented both procedural and substantive
arguments.
Substantively, MAM LLC argued that reformation is not proper
because “the complaint doesn’t show there was ever an agreement to make
the loan encumber only the residential parcel.” Procedurally, MAM LLC
argued that the Trust is not a proper party plaintiff, and that as a result, the
court lacked subject matter jurisdiction, rendering the action void ab initio.
The trial court agreed with MAM LLC’s procedural argument and
granted expungement, explaining at a hearing on the motion: “It appears to
me [counsel for [MAM LLC] is correct that [it] has long been the law that a
non-entity cannot maintain suit and that is jurisdictional. And that includes
the lis pendens with the suit.” Accordingly, the court concluded, the “motion
to expunge the lis pendens is well-taken due to lack of jurisdiction. And
therefore, the lis pendens is expunged.”
MAM LLC promptly filed a motion to dismiss, reiterating its argument
that the court lacked jurisdiction. Relying on Oliver, the principal case cited
by MAM LLC for its jurisdictional argument, the trial court agreed that the
naming of the Trust as plaintiff meant the action was void ab initio and
granted the motion to dismiss, but indicated it was inclined to allow an
amendment substituting Dupree as trustee for the Trust.
In June 2021, Dupree responded with a motion seeking leave to file a
first amended complaint, consistent with the court’s earlier indication that
that would be allowed. Dupree submitted a declaration stating that, “I first
learned of the error of naming the Trust versus the Trustee when served with
MAM LLC’s motion to intervene and related motions to expunge the notice of
pendency of the action” and argued that, “[u]nder this state’s liberal rules of
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pleading, the right of a party to amend to correct inadvertent misstatements
of facts or erroneous allegations of terms cannot be denied.”
In opposition, MAM LLC argued that the amendment request was both
tardy and futile, since Dupree sought to amend after the statute of
limitations deadline passed, more than three years after the filing of the
original complaint. The court ultimately agreed with MAM LLC, reversed
course, and denied leave to amend. Explaining that it normally takes a
liberal attitude toward motions for leave to amend, the court stated that “the
case is void. I actually lack authority to make the amendment.”
Dupree, an aggrieved party under Code of Civil Procedure section 902,
appealed from the ensuing judgment.2 The notice of appeal named FFSF “et
al.” as respondents, and CIT Bank and MAM LLC (collectively MAM)
appeared and jointly filed a responding brief. MAM filed a motion to dismiss
the appeal on two grounds: (1) because the Trust is not a legal entity, this
court lacks subject matter jurisdiction, and (2) Dupree failed to file a timely
opening brief. We denied that motion without prejudice to reconsidering the
jurisdictional argument in conjunction with our resolution of the merits of the
appeal. We now decline to reconsider our denial.
2 As a general rule, only a party of record may appeal. (County of
Alameda v. Carleson (1971) 5 Cal.3d 730, 736; Howard Contracting, Inc. v.
G.A. MacDonald Construction Co., Inc. (1998) 71 Cal.App.4th 38, 58.) But a
nonparty may also have standing to appeal in some circumstances. (Adams
v. Woods (1857) 8 Cal. 306, 314-315.) The applicable principle is that “No
person can bring a writ of error, unless he is a party, or privy to the record, or
is prejudiced by the judgment; the rule upon the subject being, that a writ of
error can only be brought by. . .[a person] who would have had the thing, if
the erroneous judgment had not been given.” (Ibid., italics added.) Here, the
“thing” Dupree “would have had” (id.)—if not for the error he challenges—is
party of record status.
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III. DISCUSSION
Turning to the merits, the parties disagree on the appropriate standard
of review as a threshold matter. According to Dupree, the trial court
erroneously concluded it was powerless to allow an amendment, which is a
question of law, reviewable de novo. According to MAM, on the other hand,
we should review for abuse of discretion, the standard that normally applies
to denials of leave to amend. In MAM’s view, so long as the trial court
reasonably concluded an amendment to the complaint was futile, the court’s
discretionary choice to deny leave should be upheld.
Dupree has the better of the argument. This appeal turns on two key
issues: first, whether the court correctly read Oliver to deprive it of power to
allow an amendment, and second, whether, if an amendment had been
allowed, Dupree’s claims were doomed by the applicable statute of
limitations. There are some collateral matters to decide, but these are the
main issues, and they are issues of law. Thus, we believe this is one of those
situations where the correctness of the court’s exercise of discretion depended
on the legal premises of its analysis. (Strobel v. Johnson & Johnson (2021)
70 Cal.App.5th 796, 817.)
A. Oliver v. The Swiss Club Tell
MAM invites us to adopt the reading of Oliver that it successfully urged
in the trial court: Because the naming of the Trust as plaintiff meant that
the court lacked subject matter jurisdiction, MAM contends, the action was
void from the outset. According to MAM, not only is it entitled to raise that
issue belatedly despite the fact that no other party noticed any problem with
the Trust as a plaintiff prior to September 2020, but the defect cannot be
cured by amendment because the absence of subject matter jurisdiction
means the court is wholly without power to act. We reject this reading of
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Oliver. Before explaining why, a full statement of the backdrop to the case is
necessary to a proper understanding of the holding there.
The proceedings in Oliver began with a complaint filed in 1958 by Roy
Oliver and his wife, who owned property near Mill Valley, for diversion of
water from a local stream in a manner that allegedly damaged their property.
(Oliver, supra, 222 Cal.App.2d at pp. 532–533.) There were three named
defendants: an unincorporated association identified as “The Swiss Club
Tell,” the County of Marin, and one Fred Schneider, apparently an officer of
the named association. (Id. at p. 533 & fn. 3.) When they brought suit, the
Olivers did not know the legal status of the Swiss Club Tell or indeed
whether it existed at all. They alleged its existence on information and belief.
(Id. at p. 533.)
An attorney named J. Thaddeus Cline filed a verified answer for the
Swiss Club Tell and Schneider. (Oliver, supra, 222 Cal.App.2d at p. 533.)
The answer generally denied the allegations of the complaint, but included
the following preamble relating to the Swiss Club Tell: “ ‘Now comes Swiss
Club Tell, an unincorporated association, if any such organization exists, one
of the defendants above named, and Fred Schneider, served as a defendant or
as an officer of said defendant association.’ ” (Ibid., italics added by Oliver.)
And as to the specific allegation in the complaint that the Swiss Club Tell
was an unincorporated association, the answer denied the allegation for lack
of sufficient information. (Ibid.)
Prior to trial, Cline and attorney John Ehlen, purporting to serve as
amici curiae for the court, filed a motion for summary judgment seeking
dismissal of the Swiss Club Tell. (Oliver, supra, 222 Cal.App.2d at p. 534.)
Cline supported this friend-of-the-court motion with an affidavit stating that
the Swiss Club Tell was a nonexistent entity and had not existed for more
9
than 20 years. (Ibid.) According to Cline’s affidavit as summarized by the
Oliver court, “there has been no unincorporated association named or known
as Swiss Club Tell since May 21, 1934, on which date articles of incorporation
were filed with the Secretary of State” for an entity known as Swiss Club
Tell, Inc. (Ibid.)3
The other attorney of record for the Swiss Club Tell, Ehlen, submitted
an affidavit to the same effect. (Oliver, supra, 222 Cal.App.2d at pp. 534–
535.) The court initially granted summary judgment, but that ruling was set
aside pursuant to stipulation, after the Olivers moved for relief under Code of
Civil Procedure section 473. (Oliver, at p. 535.) Cline and Ehlen then filed a
notice of withdrawal as attorneys “on the ground that they represented no
party to the action.” (Ibid.) After hearing argument (on the day the case
came on for trial) on the notice of withdrawal and the still-pending summary
judgment motion, the trial court granted summary judgment for the Swiss
Club Tell and dismissed it from the case. (Id. at p. 536.)
On the Olivers’ appeal, the court stated the issue to be decided as
follows: “Was the trial court justified in granting a summary judgment in
favor of defendant The Swiss Club Tell, an unincorporated association?”
(Oliver, supra, 222 Cal.App.2d at p. 532.) Before answering that question,
the court began by stating that “[t]he problem before us is not one of
misnomer or of lack of legal capacity due to some legal disability, but whether
the defendant sued is an existent person. A civil action can be maintained
3 The absence of the Swiss Club Tell, Inc. appears to have been a
deliberate, strategic choice by the Olivers. “[T]he trial court suggested that a
formal motion to amend so as to bring in [the] corporation as a party might
be made.” (Oliver, supra, 222 Cal.App.2d at p. 537.) But “[t]his suggestion
was not pursued by plaintiffs’ counsel, who . . . indicated that he believed that
the statute of limitations had run against the corporation.” (Ibid.)
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only against a legal person, i.e., a natural person or an artificial or quasi-
artificial person, a nonentity is incapable of suing or being sued.” (Id. at
p. 537.) “Where a suit is brought against an entity which is legally
nonexistent,” the court explained, “the proceeding is void ab initio and its
invalidity can be called to the attention of the court at any stage of the
proceeding.” (Ibid.)
After making these preliminary observations, the court went on to
reverse the grant of summary judgment for the Swiss Club Tell, finding there
was a triable issue of fact as to its existence. (Oliver, supra, 222 Cal.App.2d
at pp. 541–542, 546.) That holding turned on whether “the denial in [the]
answer, upon information and belief, of the allegation that defendant is an
unincorporated association amounts to an admission of that allegation.” (Id.
at p. 538.) The court explained: “This assertion is predicated upon the
argument that the existence or nonexistence of defendant as an
unincorporated association is a matter of public record,” is “not deniable upon
information and belief,” and thus the alleged fact of its existence “stands
undenied because no issue was tendered as to whether defendant is an
unincorporated association.” (Ibid.)
The court rejected the Olivers’ attempt to establish the Swiss Club
Tell’s existence either by admission in the answer or based on the
presumptive knowledge any answering defendant would have had from
public records. (Oliver, supra, 222 Cal.App.2d at pp. 538–541.) “[W]e fail to
see how a perusal of the records showing the existence of a corporation
known as the Swiss Club Tell, Inc., would establish the existence or
nonexistence of The Swiss Club Tell, an unincorporated association, unless
such records affirmatively show that such unincorporated association was
merged in the corporation,” the court explained. (Id. at p. 539.)
11
The court noted the pretrial conference order treated the Swiss Club
Tell’s existence as an issue remaining for adjudication. (Oliver, supra,
222 Cal.App.2d at p. 541.) And the Cline and Ehlen affidavits failed to
provide a sufficient basis to resolve the issue on the summary judgment
record. (Id. at pp. 543-545.) The court explained that the affidavits were not
only hearsay, but were too conclusory to establish that the requisite statutory
procedure for dissolving an unincorporated association by merger into a
successor corporation had occurred. (Ibid.)
B. The Trial Court Had Power to Grant Dupree’s Motion to Amend
The precise holding in Oliver—that there was a triable issue of fact,
warranting reversal and remand for trial—deals only with the factual and
legal existence of the Swiss Club Tell, not with whether a successor entity,
Swiss Club Tell, Inc., did exist and could properly appear. (Oliver, supra,
222 Cal.App.2d at pp. 541–542, 546.) The Oliver court expressly declined to
reach the question before us: Whether leave should have been granted to add
another party that all parties agree exists and has the capacity to appear.
When the Olivers for the first time on appeal formally requested leave to add
the Swiss Club Tell, Inc. as a defendant, the court declined to address the
issue, explaining, “We need not decide whether such amendment may be
made in the instant case because such an amendment is properly addressed
to the trial court.” (Id. at p. 537.)
We pick up where the Oliver court left off. In the trial court, and here
on appeal as well, MAM frames the amendment issue as a matter of subject
matter jurisdiction. This issue is more difficult than it seems at first blush.
On the threshold issue of legal “capacity” versus legal “existence,” there is a
degree of merit to the arguments from both sides. Dupree argues that, unlike
in Oliver, the question is one of lack of legal capacity to sue. “ ‘There is a
12
difference between the capacity to sue, which is the right to come into court,
and the standing to sue, which is the right to relief in court.’ [Citation.]
‘Incapacity is merely a legal disability, such as infancy or insanity, which
deprives a party of the right to come into court. The right to relief, on the
other hand, goes to the existence of a cause of action.’ ” (Color-Vue, Inc. v.
Abrams (1996) 44 Cal.App.4th 1599, 1604.)
Unlike defects of “fundamental” jurisdiction, which deprive a court of
all power to act (Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280,
288 (Abelleira)) and may be raised at any time (Thompson Pacific
Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 538), lack
of capacity, which results in judicial action “in excess of jurisdiction”
(Abelleira, at p. 288), must be raised by plea in abatement at the earliest
opportunity, and is waivable (Color-Vue, Inc. v. Abrams, supra,
44 Cal.App.4th at p. 1604). Judicial acts in the absence of fundamental
jurisdiction are wholly “void,” while judicial acts in excess of jurisdiction are
merely “voidable.” (Thompson Pacific Construction, at pp. 537–538.)4 When
4 For example, “[i]t has been repeatedly declared that the absence of a
guardian or conservator for a minor or person lacking legal capacity is only
an ‘irregularity’ and not a jurisdictional defect.” (4 Witkin, Cal. Procedure
(6th ed. 2021) Pleading, § 81, p. 142; see White v. Renck (1980)
108 Cal.App.3d 835, 839-840; Johnston v. Southern Pacific Co. (1907)
150 Cal. 535, 539.) “[B]ecause the court has jurisdiction of the subject matter
and the parties, the minor or person lacking legal capacity may ‘waive’ the
defect [citation], or may be estopped to attack the judgment.” (4 Witkin,
supra, § 81 at p. 143.) “The court, however, has no authority to disregard the
statutory requirement, and a judgment so rendered is in excess of its
jurisdiction and voidable by the minor.” (Ibid.; see Keane v. Penha (1946)
76 Cal.App.2d 693, 696.) Similarly, “the suspended status of corporate
powers at the time of filing of action by a corporation does not affect the
jurisdiction of the court to proceed” and “such a suspension after the filing of
action . . . but before rendition of judgment likewise does not deprive the
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MAM intervened in September, it took the position, correctly, that the Trust
lacks the capacity to sue or be sued. According to Dupree, this was a curable
defect that, at worst, made any eventual judgment voidable. Particularly
since “[a]s a general rule an intervener takes a suit as he finds it [citations],
and he cannot avail himself of irregularities the original parties have
expressly or impliedly waived” (Hospital Council of Northern Cal. v. Superior
Court (1973) 30 Cal.App.3d 331, 336), this line of argument has some appeal.
But MAM’s position is not without force in its own right. MAM
correctly points out that a trust is simply a collection of assets held for the
benefit of designated beneficiaries (Smith v. Cimmet (2011) 199 Cal.App.4th
1381, 1390–1391), and as such, has no ability to sue or otherwise act
independently from a trustee. (Portico Management Group, LLC v. Harrison
(2011) 202 Cal.App.4th 464, 473; Greenspan v. LADT LLC (2010)
191 Cal.App.4th 486, 521–522 [“ ‘because “[a] trust is not a legal entity,” it
“cannot sue or be sued, but rather legal proceedings are properly directed at
the trustee” ’ ”]; Code Civ. Proc., § 680.280 [definition of “ ‘Person’ ” does not
include trust].)5 According to MAM, the problem here runs deeper than lack
of capacity to sue. A trust lacks capacity to sue because it has no independent
court of jurisdiction or render the judgment void and subject to collateral
attack after it has become final.” (Traub Co. v. Coffee Break Service, Inc.
(1967) 66 Cal.2d 368, 371.) Corporate suspension is merely lack of capacity
and may be corrected by reinstatement prior to trial. (Id. at pp. 370–372.)
5 See J. C. Peacock, Inc. v. Hasko (1960) 184 Cal.App.2d 142, 152
(“ ‘[A]n action may not be maintained in the name of a plaintiff who is not a
natural or an artificial person having legal entity to sue or be sued’ ”); Tanner
v. Best (1940) 40 Cal.App.2d 442, 445 (reversing judgment against decedent’s
“estate” because “[t]he ‘estate’ of a decedent is not an entity known to the law.
It is neither a natural nor an artificial person. It is merely a name to indicate
the sum total of the assets and liabilities of a decedent, or of an incompetent,
or of a bankrupt.”).
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legal existence. As a Fourth District, Division Three panel explained in
Presta v. Tepper (2009) 179 Cal.App.4th 909, 913–914, while a corporation is
considered a jural person (Code Civ. Proc., § 17, subd. (6)), a trust is not. A
trust is merely “ ‘ “ ‘a fiduciary relationship with respect to property.’ ” ’ ”
(Presta, at p. 914; accord, Moeller v. Superior Court (1997) 16 Cal.4th 1124,
1132, fn. 3.) Under no circumstances can a trust be legally vivified and given
capacity to sue or be sued.
To choose which of these positions is correct as applied on this record,
we need not decide whether a judgment for the Trust in this case would have
been “void” or merely “voidable.” There was no such judgment. But on the
narrower question of legal “existence” versus legal “capacity,” we agree with
MAM. It is indeed fair to say, as the Oliver court said, that the issue is “not
one of misnomer or of lack of legal capacity due to some legal disability, but
whether [the Trust] is an existent person.” (Oliver, supra, 222 Cal.App.2d at
p. 537.) MAM is right that the Trust has no legal existence and had none
when this case was filed, at least not separate from the trustee. Looking at
things through this prism, the legal status of a trust for purposes of the right
to sue or be sued is no different from that of a dead person. On the premise
that we do indeed have an issue of legal existence in this case, MAM then
claims that Oliver controls, which is what it successfully argued in the trial
court. Because this case was “void ab initio” (ibid.), MAM argues, the trial
court correctly concluded that no amendment is possible—there is simply
nothing to amend.
We decline to go that far. While we agree with MAM’s premise, we
reject its conclusion. Because the Oliver panel expressly declined to say
whether a properly presented curative pleading amendment would be
allowed, that issue is not embraced in its holding. (Orchard Estate Homes,
15
Inc. v. Orchard Homeowner Alliance (2019) 32 Cal.App.5th 471, 476 [“Only
the ratio decidendi of an appellate opinion has precedential effect.”].) More
fundamentally, however, and wholly apart from whether the void ab initio
passage in Oliver was a holding or merely dicta, we decline the invitation to
apply Oliver in the aggressive manner MAM urges because we think its
reading of the case is legally unsound. MAM would have us treat the entire
proceeding here as void ab initio. Although the Oliver opinion does at one
point say that “[w]here a suit is brought against an entity which is legally
nonexistent, the proceeding is void ab initio” (Oliver, supra, 222 Cal.App.2d
at p. 537, first italics added), the thrust of the discussion in that passage is
directed to entry of judgment. (Id. at p. 538 [“when the defendant is not a
legal person no lawful judgment can be rendered against such a nonentity”
(italics added)].) To adopt MAM’s reading of this reference to a void
“proceeding,” we think, would continue to propagate in our law an archaic
rule that Oliver itself did not follow.6
6 The concept of voidness ab initio, sometimes known as the nullity
doctrine, was ubiquitous in English common law practice on the theory that
all proceedings in a court that lacked jurisdiction were coram non judice—
meaning “ ‘in presence of a person not a judge’ ” (Dane, Jurisdictionality,
Time, and the Legal Imagination (1994) 23 Hofstra L.Rev. 1, 23, fn. 59
(Dane); see The Case of the Marshalsea (K.B. 1612) 77 Eng.Rep. 1027, 1038–
1039)—and thus were a complete legal nullity, with no binding force or effect
on anyone. The idea was never anything more than legal fiction. In the eyes
of the law, this ancient rule held, “th[e] judge or court” without jurisdiction
was “no different from any person on the street. . . . She might wear a robe
and wield a gavel. . . . But absent jurisdiction, . . . [t]he judge without
jurisdiction might as well be an imposter.” (Dane, supra, at pp. 23-24,
fns. omitted.) The nullity doctrine developed in England as a way of
establishing the supremacy of the royal courts over ecclesiastical courts and
other tribunals with which they shared overlapping jurisdiction on various
subjects. (Dobbs, The Decline of Jurisdiction by Consent (1961) 40 N.C.
16Consider the disposition in Oliver: The appellate panel remanded for
trial. If, on remand, after finding the facts and applying the law at trial, the
trial court determined that the alleged unincorporated association defendant
was “dead, and [could] no more be proceeded against as an existing
corporation than could a natural person after his death” (Crossman v.
Vivienda Water Co. (1907) 150 Cal. 575, 580, superseded by statute as stated
in Greb v. Diamond Internat. Corp. (2013) 56 Cal.4th 243, 249 & fn. 7), the
case would have been subject to dismissal under then prevailing law. But
that does not mean everything done in the case prior to entry of judgment—
including the filing of the complaint itself—was, by legal fiction, a nullity.
Every court has jurisdiction to determine its own jurisdiction (Barry v. State
Bar of California (2017) 2 Cal.5th 318, 326; accord, Abelleira, supra,
17 Cal.2d at pp. 302–303), which explains why on remand in Oliver the trial
court had jurisdiction to try the issue of whether the unincorporated
association defendant actually existed.
Because a superior court always has power to determine its own
jurisdiction, it makes no sense to treat a potentially fatal jurisdictional
pleading defect as a problem that automatically deprives the court of power
to allow a curative amendment. That would mean the original pleaded
allegations must always be taken as conclusive on any question of
jurisdiction raised on the face of a complaint, which is precisely the opposite
of what the Oliver court held. Under common law pleading practice once
followed in England, where plaintiffs were required to plead jurisdictional
L.Rev. 49, 66–68 (Dobbs).) As carried over in the United States in the 19th
century, the nullity doctrine continued to have some purchase, but today it is
a doctrine whose “historical justifications” long ago disappeared. (Note,
Filling the Void: Judicial Power and Jurisdictional Attacks on Judgments
(1977) 87 Yale L.J. 164, 171.)
17
facts affirmatively,7 perhaps such a rule made sense in order to sort out the
jurisdictional orbits of different satellites of the royal courts. But under
modern notice pleading practice in the California courts, where “[a]llegations
of the jurisdictional facts in the pleadings are . . . unnecessary” (Estate of Keet
(1940) 15 Cal.2d 328, 335), it does not.
The complaint in this case, as originally pleaded, sought reformation,
with an accompanying claim for declaratory relief seeking to quiet title.
These are well-recognized causes of action and remedies that the Legislature
has specifically authorized.8 Plainly, there was jurisdiction over the types of
claims alleged, which gave the court power “to adjudicate the type of
controversy involved in the action.” (Rest.2d Judgments, § 11.) And CIT
Bank proceeded to answer the complaint in February 2019 without raising
any issue of jurisdiction, either over the subject matter or over any of the
parties. (Abelleira, supra, 17 Cal.2d at p. 288 [lack of “fundamental”
jurisdiction means entire “absence of authority over the subject matter or the
parties”].) Under these circumstances, the complaint Dupree mistakenly
filed in the name of the Trust was presumptively within the trial court’s
subject matter jurisdiction. Although MAM LLC sought to overcome that
presumption by challenging the Trust’s legal existence, Dupree made an
undisputed factual showing that he was willing to address this issue by
amendment to the complaint.
7 See Dobbs, supra, 40 N.C. L.Rev. at p. 73 (“[T]he allegation of
jurisdiction was necessary and without it jurisdiction did not exist. The
allegation itself, in other words, was jurisdictional. [Fn. omitted.]” (Citing
Moravia v. Sloper (C.P. 1737) 125 Eng.Rep. 1039.)).
8 Civil Code section 3399 (reformation); Code Civil Procedure
section 1060 (declaratory relief); id., section 760.010 et seq. (quiet title).
18
We see no justification for treating the complaint as if it were never
filed, effectively erasing it from the docket retroactively—and thus blocking
any curative amendment—simply because MAM LLC, appearing in the case
as intervener more than three years after it was filed, spotted an issue of
subject matter jurisdiction and objected on that ground. Under the modern
approach to jurisdictional objections, a court has inherent power to rule
against its own jurisdiction, or to rule in favor of it. (Abelleira, supra,
17 Cal.2d at pp. 302–303; 2 Witkin, supra, Jurisdiction, § 358; Rest.2d
Judgments, § 12, com. c.) And in our view, the power to address a potentially
fatal jurisdictional pleading defect includes the discretionary power to allow a
curative amendment. (Cf. Warburton/Buttner v. Superior Court (2002)
103 Cal.App.4th 1170, 1181 [where challenge to subject matter jurisdiction
over Native American tribe was raised on sovereign immunity grounds, trial
court was empowered to “ ‘ “engage in sufficient pretrial factual and legal
determinations to ‘ “satisfy itself of its authority to hear the case” before
trial’ ” ’ ”].) Indeed, presented with undisputed facts demonstrating that an
existing party with capacity to sue did exist and had been mistakenly omitted
from the original complaint, the trial court’s refusal to exercise its discretion
amounted to a failure to discharge its duty to assume jurisdiction. (2 Witkin,
supra, Jurisdiction, § 374, p. 992 [“A refusal to exercise an existing judicial
discretion is a refusal to exercise jurisdiction.”].)
Confronted with the same argument MAM makes here, an appellate
panel in Friedel v. Edwards (Fla.Dist.Ct.App. 2021) 327 So.3d 1242, refused
to adopt the view that “the filing of a civil complaint in the name of a
deceased plaintiff should be considered a legal nullity” (id. at p. 1244),
thereby depriving the trial court of power to allow a curative amendment as a
matter of Florida law. While ultimately resolving the appeal in that case on
19
other grounds (id. at p. 1245), the Friedel panel explained: “There is perhaps
an arguable justification for tethering a predeceased plaintiff’s status to
subject matter jurisdiction because civil lawsuits—and, hence, a civil court’s
adjudicative powers—must be initiated by a plaintiff or petitioner’s action,”
but “courts routinely allow substitution of plaintiffs where an originally
named plaintiff lacked sufficient standing to maintain an asserted cause of
action.” (Id. at p. 1245.) The panel noted that some cases decided under the
law of other states take the opposite view—it cited Oliver as one of two
examples—but it concluded that these cases run against “important and well-
developed principles of liberally allowing amendments.” (Id. at p. 1245,
fn. 2.)9
As a matter of California law, we agree. Our only quibble with Friedel
is that we do not think Oliver, correctly interpreted, supports a different
analysis. While that case might plausibly be given the reading MAM urges
9In addition to Oliver, the Friedel panel cited Volkmar v. State Farm
Mut. Auto. Ins. Co. (Ill.Ct.App. 1982) 432 N.E.2d 1149, 1151. There are a
number of other such decisions. Our research has turned up state court
appellate precedent relying on the nullity doctrine to bar curative pleading
amendments in at least 11 other states. (See, e.g., Owen v. Grinspun
(Tenn.Ct.App. 2022) 661 S.W.3d 70, 72; Crenshaw v. Special Adm’r of Estate
of Ayers, 2011 Ark. 222, *6 [2011 WL 1896766, *3]; Garlock Sealing
Technologies, LLC v. Pittman (Miss., Oct. 14, 2010, Nos. 2008–IA–01572–
SCT, 2008–IA–01584–SCT, 2008–IA–01599–SCT) 2010 WL 4009151, *3-*4;
Back-Wenzel v. Williams (Kan. 2005) 109 P.3d 1194, 1195–1196, 1198; Black
Canyon Coalition v. Bd. Of Co. Com’rs (Colo.Ct.App. 2003) 80 P.3d 932, 933–
935; Gregory v. DiCenzo (R.I. 1998) 713 A.2d 772, 775; Isaac v. Mount Sinai
Hosp. (Conn.Ct.App. 1985) 490 A.2d 1024, 1026–1027; Mathews v. Cleveland
(Ga.Ct.App. 1981) 284 S.E.2d 634, 636; Downtown Nursing Home, Inc. v. Pool
(Ala. 1979) 375 So.2d 465, 466; Brickley v. Neuling (Wis. 1950) 41 N.W.2d
284, 285; Proprietors of the Mexican Mill v. Yellow Jacket Silver Mining
Company (1868) 4 Nev. 40.
20
here, we view the Oliver panel’s passing reference to the nullity doctrine as
nothing more than rote repetition of outmoded jurisdictional terminology
from a bygone era. Under the California Code of Civil Procedure, “The policy
of great liberality in permitting amendments at any stage of the proceeding
was declared at an early date and has been repeatedly restated.” (5 Witkin,
supra, Pleading, § 1237, p. 647.) This rule applies to amendments changing
parties, adding new parties, and correcting erroneous names. (Id., § 1229;
Drotleff v. Renshaw (1949) 34 Cal.2d 176, 181–182; Rabe v. Western Union
Tel. Co. (1926) 198 Cal. 290, 299–300.) Nothing in Oliver compels the
adoption of an exception to that default rule.10
Our conclusion that the trial court overread Oliver is consistent with
how we treat party defects generally under the Code of Civil Procedure. Such
defects do not typically deprive courts of power to act. “[F]ailure to join an
‘indispensable’ party is not ‘a jurisdictional defect’ in the fundamental sense;
even in the absence of an ‘indispensable’ party, the court still has the power to
render a decision as to the parties before it which will stand.” (Kraus v.
Willow Park Public Golf Course (1977) 73 Cal.App.3d 354, 364.) It is for
reasons of equity and convenience, and not because it is without power to
10 In so holding, we join a substantial minority of other state appellate
courts, at least eight, counting the Friedel decision in Florida. (See, e.g.,
Ashton Properties, Ltd. v. Overton (Colo.Ct.App. 2004) 107 P.3d 1014, 1017;
White v. Helmuth (Mass.Ct.App. 1998) 700 N.E.2d 300, 301–302; Marcus v.
Art Nissen and Son, Inc. (Ill.Ct.App. 1991) 586 N.E.2d 694, 697–698;
Eberbach v. McNabney (Ind.Ct.App. 1980) 413 N.E.2d 958, 962; Hamilton v.
Blackman (Alaska 1996) 915 P.2d 1210, 1217–1218; Burcl v. North Carolina
Baptist Hosp., Inc. (N.C. 1982) 293 S.E.2d 85, 94–95; Thomas v. Grayson
(S.C. 1995) 456 S.E.2d 377. Of course, state court pleading regimes—which
are dictated by statute or rule, and ultimately by each state’s constitution—
vary state by state, so the fact there is a split in state court appellate
authority on this point is not surprising.
21
proceed, that the court often should not proceed with a case where it
determines that an “indispensable” party is absent and cannot be joined.
(County of San Joaquin v. State Water Resources Control Bd. (1997)
54 Cal.App.4th 1144, 1149.) The situation we have here is no different.
Dupree may have been an indispensable party, but his absence did not
deprive the court of fundamental jurisdiction.
C. The Trial Court Abused Its Discretion in Denying Leave To
File an Amended Complaint Substituting Dupree as The
Plaintiff
Any pleading may be amended as of right before an answer or
demurrer is filed (Code Civ. Proc., § 472), and thereafter “[t]he court may, in
furtherance of justice, . . . allow a party to amend any pleading or proceeding
by adding or striking out the name of any party, or by correcting a mistake in
the name of a party, or a mistake in any other respect.” (Code Civ. Proc.,
§ 473, subd. (a)(1).) Under Code of Civil Procedure section 473, subdivision
(a)(1), a court has ample discretion to deny a motion for leave to amend where
a proposed amendment is legally futile or where there has been inexcusable
delay in making the motion, but this discretion is not without limits. To
show an abuse of discretion, the plaintiff has the burden of demonstrating
that “there is a reasonable possibility the plaintiff could cure the defect with
an amendment.” (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074,
1081.) “ ‘Leave to amend should be denied only where the facts are not in
dispute, and the nature of the plaintiff’s claim is clear, but under substantive
law, no liability exists and no amendment would change the result.’ ”
(Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.)
Dupree has carried his burden of showing he could have cured the
party defect by substituting Dupree for the Trust. We see no basis for
refusing that proposed amendment. While a denial of leave to amend a
22
complaint will generally not be disturbed on appeal absent clear abuse of
discretion (Marvin v. Marvin (1976) 18 Cal.3d 660, 667, fn. 2), we conclude
there was such an abuse here case because of the unsound legal premises the
trial court relied upon in applying the nullity doctrine. We so conclude with
respect to the court’s alternative grounds as well. After explaining that it
had no power to allow an amendment substituting Dupree into the case, the
trial court added for good measure that the proposed amendment “appears to
. . . be four years too late and not authorized by law as the new party
circumvents the statute of limitations.” The court also pointed out that “the
defendant is prejudiced due to the dilatory pleading practice of the plaintiff
who has been on notice since [the] motion to . . . expunge . . . [the] lis pendens
[was made] well over a year ago.” We disagree that either prong of this
alternative rationale warranted denial of the amendment, here too as a
matter of law.
1. Futility
Focusing first on the issue of when the relevant limitations period
accrues, MAM points out that a claim for reformation of an instrument based
on fraud or mistake is subject to a three-year statute of limitations. (Code
Civ. Proc., § 338, subd. (d); Welsher v. Glickman (1969) 272 Cal.App.2d 134,
140 [reformation of deed due to mistake]; Tarke v. Bingham (1898) 123 Cal.
163, 165–166 [reformation of mortgage due to mistake].) According to MAM
the late Ms. Redland must be presumed to have read the terms of the deed of
trust when it issued, thus triggering the applicable limitations period upon
its execution in 2006. Since that time, MAM argues, the three-year statute
long ago expired.
This analysis is too simplistic. While it is true that a party to a
contract is charged with knowing its terms (Madden v. Kaiser Foundation
23
Hospitals (1976) 17 Cal.3d 699, 710; Markborough California, Inc. v. Superior
Court (1991) 227 Cal.App.3d 705, 716 [“The parties are bound by the terms of
the contract even if they do not read it”]), a signatory’s constructively charged
knowledge at execution does not necessarily start the running of the statute
of limitations for a reformation action. (Western Title Guar. Co. v.
Sacramento & San Joaquin Drainage Dist. (1965) 235 Cal.App.2d 815, 825
(Western Title) [applying predecessor of Code of Civil Procedure section 338,
subdivision (d)].) More accurately stated, the rule is—it depends.
“ ‘ “It has been frequently decided that the mere failure of a party to
read an instrument with sufficient attention to perceive an error or defect in
its contents will not prevent its reformation at the instance of the party who
executes it carelessly.” ’ ” (Engebrecht v. Shelton (1945) 69 Cal.App.2d 151,
154–155.) In Western Title, for example, the court stated, “the mere fact that
respondent and his predecessor in interest knew of or read the written
description would not bar reformation if the negligence was excusable. ‘The
fact that the party seeking relief has read the instrument and knows its
contents does not prevent a court from finding that it was executed under a
mistake.’ ” (Western Title, supra, at p. 825.)
Thus, the initial question here is whether Ms. Redland’s failure to
discover the alleged mistake in the deed of trust in 2006 and bring a claim for
reformation immediately is excusable. But “ ‘[w]hether the failure to discover
a mistake in a written document is inexcusable negligence so as to bar a
party from the right to reformation is a question of fact for the trial court.’ ”
(Engebrecht v. Shelton, supra, 69 Cal.App.2d at p. 154.) We think the record
discloses sufficient evidence to raise a factual issue as to excusability.
According to Dupree’s declaration submitted in opposition to MAM’s motion,
24
Ms. Redland was 83 years old and unrepresented when she entered into this
complex reverse mortgage transaction.
That leads us to the relation back doctrine. Even if we look at the
statute of limitations deadline as February 2020, three years after Dupree
discovered what he alleges is a mistake in the trust language—a deadline
which passed before he moved to amend in June 2021—the filing date for any
amended complaint would relate back to February 2017, when the original
complaint was filed. (Austin v. Massachusetts Bonding & Insurance Co.
(1961) 56 Cal.2d 596; Smeltzley v. Nicholson Mfg. Co. (1977) 18 Cal.3d 932,
934 [“an amended complaint relates back to the filing of the original
complaint, and thus avoids the bar of the statute of limitations, so long as
recovery is sought in both pleadings on the same general set of facts”].)
Reprising a variation on its argument that the trial court lacked subject
matter jurisdiction, MAM argues that the relation back doctrine does not
apply because the original complaint was void ab initio.
Other than Oliver, MAM cites no California authority for the idea of
voidness ab initio. It does, however, cite some federal authority. (See Fund
Liquidation Holdings v. Bank of America Corp. (2d Cir. 2021) 991 F.3d 370,
384 (Fund Liquidation Holdings) [plaintiff funds lacked standing where they
“did not legally exist when the case was filed”]; House v. Mitra QSR KNE
LLC (4th Cir. 2019) 796 Fed.Appx. 783, 785–786 [refusing to allow
substitution of new plaintiff in place of deceased plaintiff and relate claims
back to original filing, “ ‘as if it had been originally commenced by the real
party in interest,’ ” because the defect was jurisdictional in nature].)
These federal cases do not advance MAM’s cause. Quite the contrary,
they reinforce our conclusion that its reading of Oliver is incorrect. The
Second Circuit panel in Fund Liquidation Holdings explains, “Corporate
25
dissolution implicates two potentially distinct legal concepts: capacity to sue
and legal existence.” (Fund Liquidation Holdings, supra, 991 F.3d at p. 382.)
As the panel then points out, “the former is non-jurisdictional in nature”
because “[c]apacity to sue addresses only whether a person or company that
possesses an enforceable right may act as a litigant.” (Ibid.) Thus, the panel
concludes, lack of capacity is non-jurisdictional and can be waived. “The
same, however, cannot be said for legal existence.” (Ibid.)
Addressing the separate and more difficult problem of legal existence,
the Fund Liquidation Holdings panel goes on to make another key point.
“Because one elemental precondition for meeting the case-or-controversy
requirement” under Article III of the federal Constitution “is a claimant with
standing [citation], it must be that the non-existence of the supposed
claimant is a problem of constitutional magnitude” where the non-existence
predates the filing of the complaint. (Fund Liquidation Holdings, supra,
991 F.3d at p. 383, fn. 7.) Even then, however—as Oliver illustrates under
California law—the mere suggestion of the original plaintiff’s nonexistence
does not necessarily defeat subject matter jurisdiction. (Id. at p. 386.)
“Article III is satisfied so long as a party with standing to prosecute the
specific claim in question exists at the time the pleading is filed. If that party
(the real party in interest) is not named in the complaint, then it must ratify,
join, or be substituted into the action within a reasonable time. Only if the
real party in interest either fails to materialize or lacks standing itself should
the case be dismissed for want of subject-matter jurisdiction.” (Ibid.)
The Fund Liquidation Holdings panel acknowledges, to be sure, that
federal authority on these issues is “a mixed bag.” (Fund Liquidation
Holdings, supra, 991 F.3d at p. 381.) Some federal courts hold that an
Article III standing defect on the face of a complaint is non-curable based on
26
events that post-date its filing (such as later substitution of a new plaintiff
for an original plaintiff that lacked standing), and simply compels dismissal,
regardless of whether a party with standing exists and is willing to join the
case. These cases rely on the nullity doctrine (see Cortlandt Street Recovery
v. Hellas Telecomms. (2d Cir. 2015) 790 F.3d 411, 425, 427 (conc. opn. of Sack,
J.)) and invoke the same void ab initio principle the Oliver court uses. The
cases are from one branch of a split in federal authority. (Id. at pp. 425–427.)
What is most important to appreciate about them is that they rest,
ultimately, on constitutional standing requirements unique to the federal
courts. (See, e.g., House v. Mitra QSR KNE LLC, supra, 796 Fed.Appx. 783,
786 [“If a party does not have standing, then there is no federal jurisdiction,
and ‘the only function remaining to the court is that of announcing the fact
and dismissing the cause.’ ”].)11
Under California law, by contrast, “lack of standing as a real party in
interest is not jurisdictional; it is equivalent only to a failure to state a cause
of action.” (County of Riverside v. Loma Linda University (1981)
11 As explained in The Rossdale Group, LLC v. Walton (2017)
12 Cal.App.5th 936 (Rossdale Group), “ ‘Properly understood, the concept of
[Article III “standing”] contemplates a requirement that the plaintiff
“establish an entitlement to judicial action, separate from proof of the
substantive merits of the claim advanced.” (13A Wright et al., Federal
Practice and Procedure (3d ed. 2008) § 3531, p. 6, italics added.) This concept
“has been largely a creature of twentieth century decisions of the federal
courts.” (Ibid., fn. omitted.) It is rooted in the constitutionally limited subject
matter jurisdiction of those courts. (See id. at p. 9 [“The threshold
requirements are attributed to the ‘case’ and ‘controversy’ terms that define
the federal judicial power in Article III. Absent constitutional standing,
[federal] courts believe they lack power to entertain the proceeding.” (italics
added)]; see 13 Wright et al., supra, § 3522, pp. 103–104 [presumption that
federal court lacks subject matter jurisdiction].)’ ” (Rossdale Group, at
p. 944.)
27
118 Cal.App.3d 300, 319; see Rossdale Group, supra, 12 Cal.App.5th at
p. 944.) Nor is lack of standing a defect of constitutional magnitude. It may
have been “common sense” to the Oliver panel that “courts sit to settle
disputes between existing parties” (Oliver, supra, 222 Cal.App.2d at p. 538),
but the idea that “ ‘concrete adverseness’ ” is always fundamental to the
exercise of judicial power has not been constitutionalized under California
law in the way that it has been under federal law.12 A superior court is a
court of general jurisdiction (2 Witkin, supra, Courts, § 265, p. 323 [“the
superior court has general jurisdiction in all cases in law and equity”]), and
while there may be statutory limitations on subject matter jurisdiction in
some instances, the constitutional baseline is that we presume the court’s
power to decide cases in equity and “in all other causes.” (Cal. Const., art. VI,
§ 10; see Kabran v. Sharp Memorial Hospital (2017) 2 Cal.5th 330, 342.)13
12 United States v. Windsor (2013) 570 U.S. 744, 760 [133 S.Ct. 2675,
186 L.Ed.2d 808]; see Flast v. Cohen (1968) 392 U.S. 83, 95 [88 S.Ct. 1942,
20 L.Ed.2d 947] (“In part [the] words [‘cases’ and ‘controversies’] limit the
business of federal courts to questions presented in an adversary context and
in a form historically viewed as capable of resolution through the judicial
process.”).
13 This presumption is consistent with section 11 of the Restatement
Second of Judgments (“A judgment may properly be rendered against a party
only if the court has authority to adjudicate the type of controversy involved
in the action.”), which contrasts sharply with an earlier counterpart, section 7
of the Restatement of Judgments (1942) (“A judgment is void if it is not
rendered by a court with competency to render it.”). (See Rest.2d Judgments,
§ 11, reporter’s note, p. 114 [approach used in Restatement Second of
Judgments, “reflecting common legal usage in this country,” “departs from
the first Restatement” in that “the requirement of subject matter jurisdiction
is stated positively, rather than in the negative form that a judgment by a
court lacking competency is ‘void’ ”].)
28
The claims alleged in this case fall comfortably within the reach of this
broad grant of general jurisdiction, and MAM points to no statutory
limitation that might require a contrary conclusion. In effect, MAM invites
us to “ ‘import[] federal-style “standing” requirements’ ” (Rossdale Group,
supra, 12 Cal.App.5th at p. 944), borrowing from a line of precedent that,
even in the federal courts, “has met with some criticism” (Cortlandt Street
Recovery v. Hellas Telecomms., supra, 790 F.3d at p. 423). These cases cut
against the “modern ‘judicial tendency to be lenient when an honest mistake
has been made in selecting the proper plaintiff.’ ” (Id. at p. 421.) We decline
to adopt this ascetic strain of federal authority. Under California law, it is
enough to say that MAM has failed to overcome the default presumption of
subject matter jurisdiction in our courts.14
Falling back to a secondary line of argument, MAM claims that
Dupree’s proposed first amended complaint failed to state “viable causes of
action.” It is true that “[f]undamental or ‘subject matter’ jurisdiction relates
to the inherent authority of the court to decide the case or matter before it . . .
14 Many of the state court decisions applying the nullity doctrine to
disallow curative amendments rely in part on federal authority, without
acknowledging or appearing to appreciate that the issue arises there in the
context of constitutionally limited federal jurisdiction. (Ante, p. 20, fn. 9; see
Garlock Sealing Technologies, LLC v. Pittman, supra, 2010 WL 4009151, at
*4; Back-Wenzel v. Williams, supra, 109 P.3d at p. 1196; Black Canyon
Coalition v. Bd. of Co. Com’rs, supra, 80 P.3d at pp. 933–935; Gregory v.
DiCenzo, supra, 713 A.2d at p. 775.) Perhaps there is an arguable basis for
continuing to recognize and apply the nullity doctrine in courts of limited
jurisdiction (Rest.2d Judgments, § 11, com. d, p. 111 [“[t]he proposition that
the subject matter jurisdiction of a court could be questioned in an attack
after judgment originally found expression in the English common law courts
in cases dealing with judgments of courts of limited jurisdiction”]), but we see
no basis for it within a state court system of general jurisdiction, at least not
in California.
29
[and that] no court has inherent authority to decide a matter for which there
is no legally recognized cause of action.” (Dabney v. Dabney (2002)
104 Cal.App.4th 379, 383, citation omitted; see Conservatorship of O’Connor
(1996) 48 Cal.App.4th 1076, 1087–1088.) But Dupree did not propose some
novel claim or form of relief unrecognized in law or equity. He sought to
bring conventional claims, often made in contests over title to real property,
seeking typical relief for such claims. If he fails to prove the elements of
those claims, that may defeat the claims on the merits, but it would not be a
problem of subject matter jurisdiction.
MAM insists that Dupree failed to allege “any facts” and failed to
present “any evidence” supporting his claims for reformation and to quiet
title (even though CIT Bank already answered these claims as alleged in the
original complaint, before MAM’s intervention, and has never raised any of
the legal defects MAM now identifies). MAM also points out that certain new
claims added for the first time in Dupree’s proposed first amended complaint
(breach of the covenant of good faith and fair dealing, negligence, elder abuse)
are legally deficient. None of these substantive attacks on the claims in
Dupree’s proposed first amended complaint was presented in the trial court
in MAM’s opposition to Dupree’s motion seeking leave to amend. Some may
have merit. Some plainly do not. But taken as a whole, they do not make
Dupree’s proposed first amended complaint futile in its entirety, justifying
outright denial of the proposed amendment.
Here on appeal, we decline to entertain in the first instance what
amounts to a general demurrer attacking the legal sufficiency of all of
Dupree’s proposed claims, or in the case of some of the claims—the requests
for reformation and to quiet title—what is effectively a summary adjudication
motion. Of course, we may affirm a challenged order on appeal on any
30
available legal ground, but none of MAM’s newly advanced substantive legal
grounds for affirmance constitutes a “silver bullet” that renders pursuit of the
proposed first amended complaint a wholly futile endeavor. If MAM has
grounds for a dispositive motion winnowing the claims in this case, that
motion should be presented to the trial court.
2. Prejudice
Dupree’s reason for the delay in seeking to substitute himself into the
case as plaintiff—that he was unaware the Trust lacked legal capacity to sue
until MAM raised the issue in September 2020—is undisputed. It cannot be
said, on this record, that he was derelict in failing to notice the error before
that date. Both sides in this case have showed considerable inattention to
naming the proper parties to the suit. On the plaintiff’s side, Dupree
mistakenly named the Trust twice, once in the original complaint in 2017 and
once in an amended complaint in 2018, and no demurrer raising that issue
was forthcoming from the defense. On the defendant’s side, Chiarelli and
Associates (Chiarelli), counsel for CIT Bank, made the same mistake.
Chiarelli filed a cross-complaint for CIT Bank in 2019, even though by then
CIT Bank was no longer the assignee of FFSF, and at least according to
MAM, “no longer ha[d] any interest” in the line of credit loan. The cross-
complaint also named the Trust as cross-defendant.
So far as we can discern, the prejudice here was simply that the case
had been pending for several years when Dupree sought leave to amend.
Absent some kind of disadvantage to MAM’s defense linked to the passage of
time—such as faded memories or lost evidence—delay in and of itself was not
a valid reason to deny amendment. (Deetz v. Carter (1965) 232 Cal.App.2d
851, 857–858 [leave to amend causes no prejudice where defendant makes no
attempt to claim it had defenses that would have been raised but for the
belated amendment]; Landis v. Superior Court (1965) 232 Cal.App.2d 548,
31
557 [finding it “unreasonable to deny a party the right to amend where the
only apparent hardship to the defendants [was] that they [would] have to
defend”].)
There appears to be no such disadvantage on this record. The absence
of any material prejudice to MAM is evident from what happened
procedurally. MAM had ample notice of the reformation, quiet title and
declaratory relief claims Dupree proposed to pursue, since they were the
same claims the Trust sought to pursue, and MAM was able to mount a
vigorous defense on the merits in its motion to expunge. As Dupree points
out, none of those arguments would have been different if the name of the
plaintiff had been correctly stated at the outset of the lawsuit.
An amendment causes no prejudice where it makes no difference in the
proof and involves no unfairness. (Posz v. Burchell (1962) 209 Cal.App.2d
324, 334.) According to Dupree, that is exactly what we have here. Indeed,
he goes further. As he sees things, his “claim for reformation of the loan
documents to exclude [Parcel Two] was bound to succeed at trial” and MAM’s
“only hope was to find some technical defect in [the reformation] . . . claim.”
While we conclude the order of dismissal must be reversed, we do not share
Dupree’s certitude that an outcome for him is foreordained.
There is evidence and reasonable room for debate on both sides of this
case. On the strength of the loan underwriting documents, Dupree makes a
plausible case that Ms. Redland and FFSF mutually intended only Parcel
One to be encumbered. But based on the plain terms of the deed of trust—
read together with the alleged fact that Parcel One is landlocked—MAM
makes an equally plausible case that Parcel Two was to be encumbered as
well, or at least that the parties understood any owner of Parcel One would
have an easement running through Parcel Two by implication. Although
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Dupree insists that Parcel One is not landlocked, that dispute of fact cannot
be determined as a pleading matter.
Dupree’s proposed amended complaint alleges that, as a matter of law,
reverse mortgages can only secure residential property. Even assuming it is
true reverse mortgages can only secure residential property—a proposition of
law we need not address, for it is premature to do so—where the value of
residential security is inextricably tied to an easement, a reasonable
argument can be made that the security should at least include the
easement. Ultimately, the resolution of this and all other merits issues must
await more fulsome development of the evidentiary record at trial, or short of
that, a dispositive pretrial motion.
IV. DISPOSITION
Reversed. Costs on appeal shall be awarded to Dupree.
STREETER, J.
WE CONCUR:
BROWN, P. J.
GOLDMAN, J.
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Trial Court: Superior Court of California, County of Del Norte
Trial Judge: Hon. Darren McElresh
Counsel: Moskovitz Appellate Team, Myron Moskovitz for Plaintiff and
Appellant.
Hinshaw & Culbertson, Peter L. Isola and Brian S. Whittemore
for Defendants and Respondents.
Dupree v. CIT BANK, N.A. et al. – A163903