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First View LLC v. New Western Properties

California Court of Appeals, Second District, Seventh Division
Sep 10, 2008
No. B198342 (Cal. Ct. App. Sep. 10, 2008)

Opinion

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. NC 035805. Judith A. Vander Lans, Judge.

Law Offices of Steven Sandler and Steven Sandler for Plaintiff and Appellant First View LLC.

Christopher E. Deal for Defendants and Respondent Ernie Moore.


ZELON, J.

Plaintiff appeals the judgment entered for defendants on his action to quiet title to property and foreclose on an unrecorded deed of trust. He contends that the trial court erred in finding a transfer earlier in the chain of title was not void; in concluding a subsequent purchaser of the property was a bona fide purchaser for value; and in finding his claims were barred by laches. We affirm.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff First View Properties, LLC and its principal Phillip Irving Markowitz purchased a Note secured by an unrecorded trust deed on unimproved property in Los Angeles. The trustor under the deed of trust, Bobby L. Cornelius, failed to make payments on the Note, transferred the property to another entity he controlled, and later sold the property to defendants Peter and Melissa Bentley unencumbered by the trust deed. One year later, the Bentleys sold the property to defendant Ernest A. Moore III. In July 2004 plaintiff filed this action seeking to enforce the unrecorded trust deed.

Plaintiff’s operative First Amended Complaint stated claims against New Western Properties, Inc., Bobby L. Cornelius, Pacifica Properties LLP, Peter and Melissa Bentley, and Ernest Moore for fraud/deceit, conspiracy to commit fraud/deceit, set aside of fraudulent transfer, declaratory relief/quiet title, rescission, cancellation, accounting, damages, judicial foreclosure, negligence, injunctive relief, and establishment and foreclosure of vendor’s lien. The Bentleys cross-claimed against New Western Properties, Inc. Bobby L. Cornelius, and Fidelity National Title Co. for declaratory relief and indemnification.

The documentary evidence established that by grant deed dated October 20, 1998, Catherine Seward (Seward), the original owner of the property, sold it to New Western Properties, a company owned by Cornelius. In exchange, Cornelius gave Seward a Note in the amount of $32,717 and a trust deed dated June 25, 1998. On September 24, 1998, Cornelius wrote to Seward, requesting that she have the grant deed notarized and sent to him, and advising her that he would record the trust deed. The parties do not dispute that Cornelius never recorded the trust deed.

The June 1998 Note is not in the record.

On June 27, 2000, Cornelius, through his company New Western Properties, gave the Catherine A. Seward Revocable Trust (Seward Trust) a new Note in the amount of $32,717, payable in $250 monthly installments. On February 19, 2002, New Western Properties transferred the property to another Cornelius entity, Pacifica Properties, LLP.

In July 2002, plaintiff purchased the Note from the Seward Trust for $18,598. The purchase agreement stated that on June 19, 1998, New Western gave Seward a Note and unrecorded deed of trust, and that on June 27, 2000, New Western delivered a new promissory note in the amount of $32,717, “presumably renewing and replacing the Original Note.”

On March 13, 2003, Pacifica Properties LLP transferred the property to Peter and Melissa Bentley for $75,000. On April 9, 2004, the Bentleys sold the property to Ernest A. Moore III.

At trial, Markowitz testified that the property consisted of two vacant lots, which Cornelius said he had bought from a woman who lived in New Mexico. Markowitz admitted that Cornelius told him the trust deed had not been recorded against the property. Nonetheless, Markowitz purchased the Note from its holder, Carlsbad National Bank, the trustee of the Seward Trust, in 2002, with the intention of foreclosing on the property.

By the time trial commenced, Cornelius had died.

Markowitz testified that, after he purchased the Note, he noticed there was a “for sale” sign on the property with an out-of-state phone number on it. He called the number and without disclosing who he was, spoke to Bentley. Bentley told him that he was doing his friend Cornelius a favor and selling the property. About a week later Markowitz called Bentley back and told him he had bought the note. Markowitz discussed the property with Cornelius, who told him he had sold it to someone else.

Markowitz asserted that Cornelius transferred the property to Pacifica Properties, LLP to avoid paying taxes. Markowitz also claimed that, because his search of California Secretary of State records revealed no documents filed under the name Pacifica Properties, LLP, Pacifica Properties, LLP was a non-existent entity.

Peter Bentley testified that he bought the property from Cornelius, who was his “fishing buddy,” in March 2003 for $75,000. Cornelius did not tell Bentley that he owed any money on the property. In October 2003, Bentley put the property on the market and posted a sign on the chain-link fence. In 2004, after Bentley had entered into a sales agreement with Moore, Markowitz called and alleged he was the true owner of the property.

Moore paid $130,000 for the property in June 2004. He saw a number on a for-sale sign on the property and spoke to Bentley; Bentley told him that someone else had claimed to own the property. Moore has graded and paved the property and put in new fences and hooked up the water at a cost of approximately $50,000.

Joe Mansueto, on behalf of Fidelity National Title, testified that he acted as the title officer in connection with the Bentleys’ purchase of the property. The seller, Pacifica Properties, was a limited partnership. To verify the partnership’s entity status, Fidelity Title accepted the partnership agreement in lieu of an LP1 (the partnership document filed with the Secretary of State). He determined that Pacifica Properties was a limited partnership, although it was designated an “LLP.” The title company dealt with the inaccuracy by having Pacifica Properties, LLP be the grantor; this avoided breaking the chain of title. In Mansueto’s opinion, it was a valid conveyance.

Pursuant to the court’s request, the parties filed closing briefs.

Plaintiff asserted that Cornelius had fraudulently acquired the property from Seward, had then failed to record the grant deed, defaulted on the Note, transferred the property to a non-existent company (Pacifica Properties, LLP), and sold it to the Bentleys in a suspect transaction with the buyers purportedly paying cash. Plaintiff argued that because Pacifica Properties did not exist, New Western’s deed to it was void, and Moore could not be a bona fide purchaser for value based upon a void deed. Plaintiff requested an order to record the trust deed, and a declaration that the promissory note was in default so that he could commence foreclosure proceedings.

Moore argued that: he was a bona fide purchaser who took the property free of unrecorded interests; plaintiff had no standing to enforce the trust deed because he was not an assignee of the 1998 Note; and plaintiff’s claims were barred by laches. The Bentleys argued that the trust deed secured the 1998 Note, not plaintiff’s 2000 Note; even if the transfer to Pacifica Properties was void, this would not confer a valid property interest on plaintiff, who had nothing more than an unsecured promissory note.

On January 9, 2007, the trial court filed its Statement of Decision in which it found for defendants. The court found plaintiff had not produced any evidence that Seward or the Trustee of her Trust asserted that Cornelius had committed any wrongdoing other than the failure to make payments on the Note, and had failed to produce evidence that Seward or the Trustee had requested Cornelius to execute a duplicate deed of trust, or to record the original deed of trust. Further, the court found there was no evidence to support plaintiff’s claim that the February 2002 conveyance from New Western to Pacifica Properties, LLP was void because it conveyed property to a non-existent entity. Fidelity Title had established that: Cornelius was a partner of Pacific Properties, LP; the reference to Pacifica Properties, LLP was a typographical error; and the conveyance was made from Pacifica Properties, LLP in the deed to the Bentleys in order to avoid breaking the chain of title.

Finally, the court found Moore established he was a bona fide purchaser for value because the unrecorded trust deed was unenforceable against him. For that reason, plaintiff could not foreclose, he lacked standing because the 1998 trust deed secured the 1998 note, not the 2000 note he had purchased, and his claims were barred by laches.

DISCUSSION

Plaintiff argues that the trial court erred in (1) finding the transfer to Pacifica Properties, LLP was not void; (2) finding Moore was a bona fide purchaser even though the deed to Pacifica Properties was void; and (3) finding First View’s claims are barred by laches.

1. Substantial Evidence Supports the Trial Court’s Finding The Transfer from New Western to Pacifica Properties Was Valid.

Under the substantial evidence test, we view the entire record in the light most favorable to the prevailing party to determine whether there is substantial evidence to support the trial court’s findings. (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873-874.) We review the entire record in the light most favorable to the judgment to determine whether there are sufficient facts, contradicted or uncontradicted, to support the judgment. (Jonkey v. Carignan Construction Co. (2006) 139 Cal.App.4th 20, 24.) Substantial evidence is evidence which is reasonable, credible, and of solid value. In evaluating the evidence, we do not consider issues of credibility or whether contrary inferences may be made from the evidence. (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1632-1633.)

To be valid, a deed must (a) be in writing; (b) name the grantor and grantee; (c) be subscribed by the grantor (Jones v. Coulter (1925) 75 Cal.App.540, 547); and (d) be delivered to and accepted by the grantee. (Meyer v. Wall (1969) 270 Cal.App.2d 24, 27.) A misnomer in the grantor or grantee does not render the deed invalid. (Sixth District etc. Assn. v. Wright (1908) 154 Cal. 119, 127.) “The general rule is that misnomer of a corporation will not invalidate a grant or conveyance to or by it, if it appears from the instrument itself, or is shown by such evidence as is admissible upon the question, that it was the corporation intended.” (Ibid.)

The evidence supports a finding that Pacifica Properties’ designation as an “LLP” was a misnomer, and that it was a valid partnership. Fidelity Title’s title officer testified that he received documentation indicating that “Pacifica Properties, LP” was a partnership owned or controlled by Cornelius, who was authorized to sign on its behalf, and that therefore the designation “Pacifica Properties, LLP” was in error. He further testified that in order to keep the chain of title clean, they used the misnomer in the conveyance to Bentley. (See Peckham v. Stewart (1893) 97 Cal. 147, 152-154.) Plaintiff presented no evidence to the contrary.

Further, a limited partnership’s failure to file a certificate of limited partnership with the secretary of state’s office (Corp. Code, § 15621, subd. (b)) does not mean it is a non-existent entity, as plaintiff argues. Rather, the failure to file with the secretary of state renders the entity a general partnership. (Corp. Code, § 15044; American Alternative Energy Partners II v. Windridge, Inc. (1996) 42 Cal.App.4th 551, 559-561.) General partnerships may own and transfer property. (See Corp. Code, § 16204, subd. (b)(1); 16302, subd. (a)(1).) Therefore, whether or not Pacifica Properties, LLP filed a certificate of partnership with the Secretary of State, it existed as a general partnership and had the capacity to own and transfer property. Contrary to plaintiff’s assertions of fraud, the evidence supports the trial court’s finding of a valid transfer to a valid entity.

Limited partnerships created after July 1, 1984 are not formed until the certificate of limited partnership is filed with the secretary of state, and filing is essential to existence. (Corp. Code, § 15621, subd. (b).) All partnerships are required to file the certificate with the secretary of state. (Corp. Code, § 15621, subd. (a).) Partnerships formed before July 1, 1984 cannot maintain any action in California courts until such a certificate is filed. (Corp. Code, § 15712, subd. (b)(4).) Pacifica Properties, LLP was formed in February 2001.

2. Moore Was a Bona Fide Purchaser For Value Who Took Without Notice of The Unrecorded Trust Deed.

A bona fide purchaser for value is one who acquires his or her interest in real property without notice of another’s asserted rights in the property and therefore takes the property free of such unknown rights. (Hochstein v. Romero (1990) 219 Cal.App.3d 447, 451.) The absence of notice, constructive or actual, is an essential requirement. (Gates Rubber Co. v. Ulman (1989) 214 Cal.App.3d 356, 364.) An unrecorded deed does not impart constructive notice. (Civ. Code, §§ 1213, 1214; Hochstein, supra, 219 Cal.App.3d at p. 452.)

Here, it is undisputed that the 1998 deed of trust was unrecorded and therefore it could not impart constructive notice to Moore. Because we conclude plaintiff has failed to establish that Moore was anything other than a bona fide purchaser who acquired valid title and plaintiff cannot prevail on his claims based upon the trust deed, we need not consider whether the doctrine of laches applies.

DISPOSITION

The judgment of the superior court is affirmed. Respondent is to recover his costs on appeal.

We concur: PERLUSS, P. J., JACKSON, J.


Summaries of

First View LLC v. New Western Properties

California Court of Appeals, Second District, Seventh Division
Sep 10, 2008
No. B198342 (Cal. Ct. App. Sep. 10, 2008)
Case details for

First View LLC v. New Western Properties

Case Details

Full title:FIRST VIEW LLC, Plaintiff and Appellant, v. NEW WESTERN PROPERTIES et al.…

Court:California Court of Appeals, Second District, Seventh Division

Date published: Sep 10, 2008

Citations

No. B198342 (Cal. Ct. App. Sep. 10, 2008)