Opinion
H040695
01-30-2017
WILLIAM FISCHER et al., Plaintiffs and Appellants, v. CLIFFORD JEFFREY STANLEY et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Cruz County Super. Ct. No. 1-12-CV225391)
INTRODUCTION
We are asked in this appeal to reverse a summary judgment in favor of defendants in a dispute involving the short sale of real property in San Jose. In late 2010, plaintiffs and appellants, William Fischer and Rachel McDonald (the Fischers), purchased the property from the original owner, George Wallace, who had defaulted on his real estate loan from a bank. The Fischers believed that, as part of the short sale, defendants Clifford Jeffrey Stanley and Cynthia Ann Stanley (the Stanleys), who held two junior liens on the property securing personal loans they had made to Wallace, had agreed to release their liens in exchange for $3,000. After the sale closed, however, the Fischers learned that the Stanleys had never signed any agreement to release their liens nor had they reconveyed their deeds of trust. The net result was that, absent court intervention, the Stanleys' liens were not only still in place, but they were now in senior position.
When the Stanleys began steps to foreclose, the Fischers filed suit, asserting a variety of causes of action, but all essentially invoking the equitable power of the court to cancel deeds of trust when they have become worthless and to remedy what they claimed to be the Stanleys' windfall of seeing their liens go from being junior and worthless to being senior and secured by the funds the Fischers put into the sale. The trial court granted summary judgment to the Stanleys, finding that the Fischers were in control of the short sale and that the Fischers could not cancel the Stanleys' liens outside the foreclosure process. On appeal, although they raise a number of issues, the Fischers make clear that the only remedy they seek is outright cancellation of the Stanleys' deeds. Because the Fischers have provided us with no authority for the remedy they seek, we will affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
I. The Property And The Short Sale
Before December 30, 2010, George Wallace (Wallace) was the owner of real property on Camelia Drive in San Jose (the property). The property was subject to three liens. The first was a deed of trust recorded in 2006 which secured a loan for $999,999. The lienholder was Deutsche Bank National Trust Company, As Trustee On Behalf Of HSI Asset Securitization Corporation Trust 2006-HE1 (Deutsche Bank). During the relevant time period, BAC Home Loans Servicing, LP (Bank of America) acted as servicer for the Deutsche Bank loan.
In 2003, the Stanleys loaned Wallace $222,986.94. In 2008, they loaned him another $110,000. These loans were both secured by deeds of trust on the property, which were both recorded on October 22, 2008. The total encumbrance on the property from the Stanleys, therefore, was slightly less than $323,000.
By October 2009, Wallace was in default on his Deutsche Bank loan. A notice of trustee's sale based on this default was recorded in January 2010 and by this time the balance on the Deutsche Bank loan was $1,031,333.01. The foreclosure sale, original set for February 11, 2010, was postponed until January 2011.
Both sides agree that Wallace, as seller, and the Fischers, as buyers, entered into a short sale agreement to purchase the property. Although they did not reference it in their separate statement, the Fischers submitted a copy of the agreement to the trial court as part of their opposition to the Stanleys' motion for summary judgment. It shows the purchase price to be $915,000. Both parties also agree that Bank of America conditioned its approval on the Stanleys' receiving $3,000 in exchange for their deeds of trust.
The parties do not dispute that the Stanleys deeds have never been reconveyed. Nor is there any claim by the Fischers that the Stanleys agreed in writing to reconvey their deeds. Instead, as will be described in more detail below, the Fischers claim that there is a factual dispute as to what Mr. Stanley told Sahib Mann (Mann), the real estate agent representing both Wallace and the Fischers. In summary, Mr. Stanley maintains that when he was given the offer to reconvey his deeds for $3,000, he turned the offer down and decided to bid at the foreclosure sale to protect what he called his investment. The Fischers point to an e-mail which appears to show that Stanley told Mann that he would indeed accept the offer and deliver the necessary documents to him.
On December 30, 2010, without a written agreement to reconvey or an actual reconveyance of the Stanleys' deeds, the Fischers' escrow agent, Old Republic Title Company (Old Republic) paid off the Deutsche Bank loan (through Bank of America), with $372,016.12 from the Fischers themselves (apparently proceeds from the sale of their former residence) and a purchase money loan taken out by the Fischers of $549,000 from a new lender.
It appears that one of the documents cited by the Fischers on appeal to support these facts was submitted to the trial court only in relation to another motion and not in opposition to the summary judgment motion. The documentation which does appear to have been submitted as part of the Fischer's opposition to the summary judgment motion has figures slightly, but not materially, different from the one stated above and in the Fischers' brief.
Shortly thereafter, when Old Republic attempted to send the Stanleys a $3,000 check for reconveyance of their deeds of trust, the Stanleys replied in an e-mail on February 16, 2011, stating that they did not agree to reconvey their deeds—they therefore rejected the check. Almost a year later, on January 31, 2012, the Stanleys, through the Foreclosure Company, recorded a notice of default and began foreclosure proceedings on the property on one of their deeds of trust. II. The Fischers' Complaint
Mr. Stanley's declaration in support of this fact states that the notice of default was for the deed in the second position.
In response, the Fischers filed suit on May 25, 2012. Their verified complaint purported to state six causes of action, five of which were apparently meant to be stated against the Stanleys: declaratory relief, preliminary and permanent injunction of real property security, cancellation of two deeds of trust, unjust enrichment, and quiet title.
Also named as defendants were Wallace, the Foreclosure Company, Inc., and all persons unknown claiming any interest in the property.
The Fischers alleged that the Stanleys were told of the short sale offer of $3,000 to reconvey their deeds of trust and that, if foreclosure proceeded, their liens would be "wiped out." On information and belief, the Fischers claimed that the Stanleys had "orally consented to the short sale, and agreed to reconvey of [sic] their security interests for the payment from the sales proceeds in escrow."
The Fischers' declaratory relief claim asked the court to declare the following: 1) that the Stanleys' deeds were worthless as of December 30, 2011 and "as of today remain worthless"; 2) that the Stanleys' deeds be cancelled with the court declaring that the Stanleys have the status of "sold out juniors with the right to proceed against" Wallace on their promissory notes; 3) that the Stanleys would be unjustly enriched if they were allowed to proceed with a foreclosure as the Fischers' "monies have caused the extinguishment of the first lien on the real property at the time of the sale" from Wallace to the Fischers, and; 5) that the Fischers were bona fide purchasers for value.
The bona fide purchaser for value allegation was not raised in opposition to the summary judgment motion, nor does it seem relevant to this dispute.
The remaining claims incorporated and were based on the same set of facts as the declaratory relief claim. In their injunctive relief claim, the Fischers asked that the court enjoin, both preliminarily and permanently, both the Stanleys and their foreclosure trustee from proceeding with any foreclosure. Their cancellation claim asked the court to cancel both of the Stanleys' deeds. The unjust enrichment claim asked the court to "find that [the Stanleys] would be unjustly enriched if they were allowed to go forward to foreclose on the security earlier granted by Wallace, given that Wallace no longer owns the property, Wallace did not receive any cash out of the sale of the property and there was no equity in the [property] to pay the liens of defendants Stanley." (Capitalization omitted.) And, finally, the quiet title claim alleged that the Stanleys had no interest in the property at all. (In August 2012, the Fischers sought and were granted a preliminary injunction which prohibited the Stanleys from foreclosing until the completion of trial.) III. The Stanleys' Motion for Summary Judgment
On September 18, 2014, the Stanleys filed a motion for summary judgment. The Stanleys relied on the same basic eight factual assertions in support of their motion as to each of the Fischers' claims. In addition to reciting the elementary facts of their loans to Wallace and the deeds of trust securing them, the Stanleys also claimed that it was undisputed that the Stanleys "never agreed to reconvey the Deed of Trust for $3,000.00" and that the "Fischers admit that, when they purchased [the property], they knew that the Stanleys had not agreed to reconvey the Deeds of Trust." They also asserted that their deeds of trust had not been reconveyed. There was no basis for the cancellation of their deeds, the Stanleys argued, because of a buyer's mistaken view that a purchase was free of encumbrances and that no quiet title claim could be stated because the deeds were not invalid or unenforceable.
On the unjust enrichment claim, the Stanleys contested the idea that the deeds were worthless because, as junior lienholders, the Stanleys could have credit bid for the property at the foreclosure sale, meaning that it would have taken only $1.1 million in cash for the Stanleys to purchase the property while it would have taken the Fischers $1.5 million. The Stanleys further argued that they were doing nothing unjust by foreclosing on valid deeds of trust. Therefore, the Stanleys asserted, no injunctive or declaratory relief was available.
In opposition, the Fischers conceded that the Stanleys' deeds were valid. Their central theory, however, was that the "doctrine of unjust enrichment compels a Court to decide whether the real property encumbered had any value to pay the [Stanleys'] notes. If the real property had no value to pay them what they were owed[,] then the [Stanleys'] remedy was to accept $3,000 for full reconveyance and cancellation of the notes or to sue the debtor, George Wallace[,] to collect their monies owed. But they cannot sue their debtor until they have a declaration that they have the status of a sold out junior. Once that status is declared, the [Stanleys] have had returned to them by the [Fischers] what they lost."
The Fischers argued, contrary to the tone of their appeal, that the Stanleys had been wronged by Mann and Wallace and that the Stanleys were "without fault." Nonetheless, according to the Fischers, the Stanleys had received a windfall from their payment of Wallace's debt. In addition, the Fischers asserted that the fact that the Stanleys never agreed to reconvey the deeds of trust was disputed by, among other things, an e-mail from the real estate agent, Mann, seeming to show that Mr. Stanley had agreed to accept the offer of $3,000 in exchange for the release of the liens. They also argued the Stanleys' supposedly undisputed fact that the Fischers admitted that the Stanleys had not agreed to reconvey their deeds of trust when they purchased the property was a misinterpretation of their discovery responses—that the only real fact which was admitted was that they believed the deeds were to be reconveyed after the Stanleys had received $3,000.
The Fischers also submitted a set of seven additional material facts which they contended were undisputed—including that the property did not have enough value to pay on the Wallace notes, that the Stanleys had taken no action to claim default on their loans after they learned that the Deutsche Bank loan was in default, that both notes were demand notes with rights to accelerate, and that Wallace had confirmed his debt to the Stanleys. The Fischers conceded that the additional facts submitted by the Fischers were true but immaterial.
The Stanleys' replied, asserting generally that the Fischers had cited no law to support their view that the deeds could be cancelled. In an order filed on January 13, 2013, the trial court granted the Stanleys' motion and dissolved the preliminary injunction.
In its order, the trial court recognized that it did not need to address most of the arguments between the parties and simply rejected the Fischers' view that the Stanleys should be treated as sold-out juniors: "The flaw in the plaintiff's argument, however, is that a foreclosure sale by the senior lienholder did not occur here. As such, the defendants are not technically 'sold-out' junior lienholders. By proceeding outside of the foreclosure process (via a short sale), the plaintiffs cannot force this result upon the defendants. The plaintiffs were in control in that they did not have to consummate their short-sale of the Property without removing the defendants' deeds of trust. The plaintiffs could have walked away from the short sale and bid at the foreclosure. Had they won at the foreclosure sale, the plaintiffs would have obtained the result they now seek, elimination of the defendants' deeds of trust. Instead, the plaintiffs ask the court to now judicially declare the defendants as 'sold-out' junior[s] so that the defendants can pursue a deficiency against Wallace, but there is no legal authority provided by the plaintiffs to have this result crammed down on [sic] the defendants. If anything, this would result in an injustice to the defendants because it takes the defendants' secured debt and turns it into an unsecured debt." Judgment was entered by the trial court on January 27, 2014 and this timely appeal followed.
DISCUSSION
The Fischers raise a number of arguments on appeal. Most centrally, they argue that the trial court had equitable power to avoid what they view as a windfall to the Stanleys, a power which they claim included the ability to cancel the Stanleys' deeds of trust. They also assert that the trial court's finding that they "controlled the escrow" is not supported by the evidence, that they cannot be held responsible for the acts of the title company, and that basic principles of unjust enrichment were ignored.
As we shall explain, however, we need not address most of these points in detail. Just as in their complaint and in opposition to the summary judgment motion, the Fischers' goal on appeal is to simply cancel the Stanleys' deeds. As they argue: "The judgment before this Court now on appeal is the trial court's ruling as a matter of law that the Court has no equitable power to cancel validly recorded deeds of trust that are rendered valueless by market conditions and not the conduct of the lender or borrower." They also argue that "[t]here is no prejudice to the [Stanleys] from cancelling their deeds of trust that had no value in the asset to pay them and instead allow them to pursue their debtor. That is their only remedy that does NOT take advantage of [the Fischers]." Although the Fischers framed their complaint as including five different causes of action, including quiet title and unjust enrichment, as the trial court recognized, the only remedy the Fischers seek cannot be granted to them. I. Standard of Review
The trial court shall grant a motion for summary judgment if all the papers show there is no triable issue as to any material fact and the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) The defendant moving for summary judgment has the burden of establishing that either (1) one or more elements of the plaintiff's causes of action cannot be established or (2) a complete affirmative defense to the causes of action exists. (§ 437c, subds. (o)(1), (2), (p)(2).) To demonstrate that the elements of a cause of action cannot be established, the defendant may show the plaintiff does not possess evidence needed to support a prima facie case and cannot reasonably obtain the needed evidence. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.) The defendant may also, but need not, present evidence conclusively negating an element of the cause of action. (Ibid.) Once the defendant has met its initial burden, the burden shifts to the plaintiff to produce evidence showing a triable issue of material fact. (§ 437c, subd. (p)(2).)
Unless otherwise stated, all statutory references are to the Code of Civil Procedure.
On appeal from summary judgment, we review the record de novo and must independently determine whether triable issues of material fact exist. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 767; Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) We resolve any evidentiary doubts or ambiguities and view all inferences from the evidence in the light most favorable to the party opposing summary judgment. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 843; Saelzler v. Advanced Group 400, supra, 25 Cal.4th at p. 768.) Similarly, where there are no triable issues of fact and the parties' contentions involve an issue of law, summary judgment is proper. (See Lopez v. McDonald's Corp. (1987) 193 Cal.App.3d 495, 503.) II. General Background
Generally, "[a] real property loan generally involves two documents, a promissory note and a security instrument. The security instrument secures the promissory note. This instrument 'entitles the lender to reach some asset of the debtor if the note is not paid. In California, the security instrument is most commonly a deed of trust (with the debtor and creditor known as trustor and beneficiary and a neutral third party known as trustee). The security instrument may also be a mortgage (with mortgagor and mortgagee, as participants). In either case, the creditor is said to have a lien on the property given as security, which is also referred to as collateral.' (Bernhardt, Cal. Mortgage and Deed of Trust Practice (Cont.Ed.Bar 2d ed. 1990) § 1.3, p. 5, italics removed.)" (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1235.)
There can, of course, be more than one lien on the same property and priority between them "is largely determined by recordation. Regardless of the time of transfer, the California real property recording system gives priority to the person whose instrument is first recorded, if that person is a bona fide purchaser or encumbrancer without notice of prior interests. Any subsequently recorded mortgage [or deed of trust] is inferior. ([Civ. Code §§] 1213, 1214; citations.)" (4 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property, § 49, p. 843; see Civ. Code, § 2897 ["Other things being equal, different liens upon the same property have priority according to the time of their creation . . . ."].)
If there is a foreclosure sale on a senior loan, "[a] junior lien . . . will be extinguished . . . unless the successful bidder purchases at a price sufficiently high to pay off both the senior lien and the junior lien. [Citation.]" (Banc of America Leasing & Capital, LLC v. 3 Arch Trustee Services, Inc. (2009) 180 Cal.App. 4th 1090, 1101.) "The term 'sold-out junior lienor' refers to the situation in which a senior lienholder forecloses its lien, eliminating the junior lienor's security interest." (Bank of America v. Graves (1996) 51 Cal.App.4th 607, 611 (Graves).)
Generally, "[i]n California, a creditor secured by a trust deed on real property must rely on the security before enforcing the underlying debt. (§ 580a, 725a, 726.) Even if the security is insufficient, the antideficiency statutes (§ 580a, 580b, 580d) may limit or bar a judgment against the debtor for a deficiency." (Graves, supra, 51 Cal.App.4th at p. 611.) This rule, however, does not apply to the sold-out non-purchase-money junior, who is free to pursue any remedy on the note. (Id. at p. 613; see also Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35, 38, 39.)
As an alternative to foreclosure, lenders and borrowers can agree to what is called a short sale. In "a short sale, the lender agrees to release its lien on the borrower's property so that the borrower can sell the property to a third party. In exchange, the borrower agrees to give the lender all of the proceeds from the sale. Both parties know that the sale proceeds will fall short of the total amount that the borrower owes. The Assembly Committee on Judiciary has observed that short sales 'save banks millions in foreclosure costs' and can help homeowners 'feel like they took responsibility for the obligation to pay [their creditors] back.' (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 931 (2009-2010 Reg. Sess.) p. 61.) Although there were virtually no short sales in California in 2007, the number grew to a few thousand in 2008, to 90,000 in 2009, and to approximately 110,000 in 2010. (See Sen. Com. on Banking & Financial Institutions, Analysis of Sen. Bill No. 412 (2011-2012 Reg. Sess.) as amended Mar. 21, 2011, p. 2.)" (Coker v. JPMorgan Chase Bank, N.A. (2016) 62 Cal.4th 667, 673 (Coker).)
The process " ' "remains voluntary on every participant's part—only lenders that actually agree to the sale will be affected, and sellers that cannot put together an acceptable sale may still go to foreclosure and even bankruptcy." ' " (Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1393 (Roberts).) As a short sale involves the transfers of an interest in real property, it must be in writing. (See Civ. Code §§ 1624, subd. (a)(4), 1091.)
Although voluntary, there are some aspects of short sales that are similar to a foreclosure. For example, section 580b has recently been interpreted to bar deficiency judgments on purchase money loans after short sales, in addition to foreclosures. (§ 580b, subds. (a), (b); Coker, supra, 62 Cal.4th at p. 688.) Section 580e provides similar protections, but, in a significant distinction with 580b, was expanded in July 2011 to include "any deed of trust, including junior lienholders, if the holder of said deed of trust consented to the short sale and received the proceeds of the sale as agreed. (Stats. 2011, ch. 82, § 1, eff. July 15, 2011.)" (Roberts, supra, 217 Cal.App.4th at p. 1393; § 580e, subd. (a)(1).) Neither of these statutes is relevant to this dispute, however.
In the unusual case, such as here, where a short sale proceeds without the express written agreement of a junior lienholder and no action is taken to set the sale aside, there is no authority that exempts them from the usual rule that the junior liens remain in effect. " 'Real property is transferable even though the title is subject to a mortgage or deed of trust, but the transfer will not eliminate the existence of that encumbrance. Thus, the grantee takes title to the property subject to all deeds of trust and other encumbrances, whether or not the deed so provides. This means that the property may be sold on foreclosure of that deed of trust if the debt is not paid, even though the property is no longer owned by the original debtor.' (2 Bernhardt, Cal. Mortgage and Deed of Trust Practice (Cont.Ed.Bar 3d ed. 2002) § 9.119, p. 667; see also 4 Miller & Starr, Cal. Real Estate (3d ed. 2000) Deeds of Trust and Mortgages, § 10:208, p. 635.)" (Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 438-439.) III. The Stanleys' Deed Cannot Be Cancelled Because Of Their Lack Of Value
We first reject the Fischers' argument that the trial court had inherent authority to cancel the Stanleys' deeds of trust because they were "worthless." In their complaint, the Fischers alleged that the Stanleys' deeds, combined, secured an indebtedness of $322,986.94. The Fischers also asserted that, at the close of escrow on December 30, 2010, the amount necessary to pay off the first lien was over $1 million but that the fair market value of the property was $915,000. They also argue that, as of March 2012, an appraisal showed the property to be worth $910,000, which was less than their purchase price of $915,000. Because of this supposed lack of value, the Fischers asked the court to cancel the deeds of trust.
We need not discuss the various factual disputes between the parties to reject this theory. The Fischers have pointed to no authority for the proposition that a court can simply cancel a lienholder's security interest because it happens to be supposedly valueless at a specific time. Of course, as mentioned above, a junior lien might be extinguished as a result of a foreclosure if there are not enough proceeds from the sale to pay the junior lien. (See Graves, supra, 51 Cal.App.4th at p. 611.) But there was no foreclosure sale here.
Lien voidance is also available in bankruptcy proceedings in certain circumstances. (See HSBC Bank USA, N.A. v. Blendheim (In re Blendheim) (9th Cir. 2015) 803 F.3d 477, 481-482 [citing 11 U.S.C. § 506, subd. (d)].)
The Fischers' argument on this point is conceptually akin to one recently rejected in another, though related, context. In a case involving an alleged wrongful foreclosure, the defendants argued that, because the plaintiff had no equity in the property at the time of the foreclosure, summary judgment was proper because the plaintiff could show no damages. (See Miles v. Deutsche Bank Nat'l Trust Co. (2015) 236 Cal.App.4th 394, 408-410 (Miles).) In rejecting the argument, the court stated that "[t]he rule applied by the trial court and urged by defendants would create a significant moral hazard in that lenders could foreclose on underwater homes with impunity, even if the debtor was current on all debt obligations and there was no legal justification for the foreclosure whatsoever. So long as there was no equity, there would be no remedy for wrongful foreclosure. . . . Surely that cannot be the law." (Id. at 410.)
While Miles was a wrongful foreclosure case, the same general principles apply here. As stated above, a short sale is " ' "voluntary on every participant's part . . . ." ' " (Roberts, supra, 217 Cal.App.4th at p. 1393.) In the short sale context, junior lienholders with so-called underwater loans may be able to receive some payment from the other participants in exchange for the avoidance of the uncertainties and expense of the foreclosure process. In any event, the junior lienholder bargained for, and received, a security interest in real property. Absent a voluntary agreement to give up that security interest or if the interest is extinguished by operation of law, the Fischers have pointed out to us no authority that a court may use its equitable power to allow a third-party purchaser to extinguish a lien against the lienholder's wish to retain it because of that third party's view of current market values. IV. Cancellation Of The Stanleys' Deeds Is Not Justified By Equity
The second component of the Fischers' argument that the Stanleys received a windfall is that their deeds of trust were stepped up from junior position to senior position. The Fischers' main grievance on appeal seems to be with the trial court's finding that they "were in control in that they did not have to consummate their short-sale purchase of the [p]roperty without removing the defendants' deeds of trust."
The Fischers raise several disputes which they claim should have prevented this finding. For example, the Fischers argue that they disputed the assertion that "[t]he Stanleys never agreed to reconvey the Deeds of Trust for $3,000.00." In the summary judgment motion, this fact was supported by Clifford Stanley's own declaration that, during his discussions with Mann, "[he] never agreed to accept a discounted amount for our deeds of trust and I did not agree to reconvey our deeds of trust for less than the full amount owed." Stanley admitted to knowing about the terms of the short sale and the December 30, 2010 deadline imposed by Bank of America. But he stated that he had decided to reject the offer and would decide to attend the foreclosure sale to purchase the property to protect his investment.
In disputing this fact, the Fischers relied upon the declaration of Edith Murphy, a vice president and legal counsel at Old Republic, who attached an e-mail she had received from Mann, the realtor representing Wallace. That e-mail appears to recount a line of communications between Mann and Mr. Stanley from July 2010 to December 2010, in which Mann indicates that Mr. Stanley had told him he would accept $3,000 for release of the junior liens. The last communication received was on December 23, 2010, in which Mann recounts that he received two calls from Mr. Stanley "indicating that he was in Vegas stating he would sign and deliver to title [sic] the documents."
Although the Stanleys argue that this evidence should be disregarded because it was not raised below and because it is hearsay, it does appear that the Fischers referred to the entire Murphy declaration in opposing the summary judgment motion—although the formatting of the citation to the evidence to the trial court is admittedly confusing. Moreover, there is no evidence in the record that the Stanleys objected to this evidence. We will therefore consider it.
This raises the inference that Mr. Stanley might have led Mann to believe that he would accept the amount offered in exchange to reconvey the junior deeds. In addition, it cannot be ignored that, before the Fischers purchased the property, the Stanleys were in a junior position on a defaulted loan. After the Fischers purchased the property, the Stanleys stood in a senior position with the ability to recover presumably the full amount of the loans they made to Wallace. The Stanleys' reply is that they did not receive a windfall because they lent the funds to Wallace and were only seeking repayment of those loans. But this entirely ignores the fact that it was the Fischers' purchase of the property that would have allowed the Stanleys to recoup their loans to Wallace. And while the Stanleys also assert that their intent was to purchase the property at the foreclosure sale had the Fischers not intervened and that they could have outbid the Fischers, this also ignores that the Stanleys proceeded to use the fact that the short sale did take place to their advantage.
We also find merit in the Fischers' argument that their response to the Stanleys' interrogatory No. 28, in which they stated that they did not believe that the Stanleys' deeds would be conveyed prior to the close of escrow, does not show that they elected to proceed with the short sale with knowledge that the Stanleys had refused to agree to reconvey their deeds of trust. As the Fischers' response to special interrogatory No. 29 indicates, this was not an indication that the Fischers knew that the Stanleys had failed to agree, but a mere indication of the mechanics of when the deeds would be reconveyed.
We agree that these facts may have been enough to create a material dispute as to whether the Stanleys may have been unjustly enriched at the expense of the Fischers. (See Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1132 [the elements for a claim of unjust enrichment are the receipt of a benefit and unjust retention of the benefit at the expense of another].) But, unjust enrichment is based on restitution. (See First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1662-1663.) And so the question becomes what kind of remedy can a party seek in the Fischers' position?
As mentioned above, the Fischers make clear that the only remedy they seek is cancellation of the Stanleys' deeds of trust—that this is the "only remedy that does NOT take advantage of [the Fischers]." As the Fischers acknowledge, cancellation of deeds of trust is normally governed by Civil Code section 3412, which 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." They also acknowledge that this statute does not apply here.
Instead, as the parties' briefing shows, the way that courts have used their equitable powers to correct the unfairness of a junior lienholder taking a senior position as a result of the actions of another is through the doctrine of equitable subrogation. "The Supreme Court has stated the general rule applicable to a lender's entitlement to equitable subrogation as follows: ' "One who advances money to pay off an encumbrance on realty at the instance of either the owner of the property or the holder of the incumbrance, either on the express understanding, or under circumstances from which an understanding will be implied, that the advance made is to be secured by a first lien on the property, is not a mere volunteer; and in the event the new security is for any reason not a first lien on the property, the holder of such security, if not chargeable with culpable and inexcusable neglect, will be subrogated to the rights of the prior encumbrancer under the security held by him, unless the superior or equal equities of others would be prejudiced thereby, and to this end equity will set aside a cancellation of such security, and revive the same for his benefit." [Citations.]' (Simon Newman Co. v. Fink (1928) 206 Cal. 143, 146; citations.)" (Branscomb v. JPMorgan Chase Bank, N.A. (2014) 223 Cal.App.4th 801, 806.)
Although the Fischers urge us to apply the principles of equitable subrogation here, they have provided us with no authority for the proposition that a court can simply cancel a deed of trust entirely under this doctrine. Indeed, the Fischers state explicitly that "[e]quitable subrogation was not pled here as it would not solve the unfairness between these two parties." It appears that the Fischers believed this because they were "new owners, not lenders." Given that outright cancellation of the Stanleys' deeds is the only remedy the Fischers seek and given that the Fischers have provided us with no authority to cancel the Stanleys' deeds entirely, the trial court's judgment will not be disturbed.
Whether this is correct is a question the parties did not brief. We note, however, that one of the first cases in California applying the doctrine of equitable subrogation did so in favor of a purchaser of a property, rather than a lender. (See Darrough v. Herbert Kraft Co. Bank (1899) 125 Cal. 272, 274-275.) This early decision is discussed at length in the very decision heavily relied upon by the Fischers in their reply brief to this court. (See Lawyers Title Ins. Corp. v. Feldsher (1996) 42 Cal.App.4th 41, 47.)
Because we affirm the trial court's judgment in favor of the Stanleys, we need not address the Fischers' argument that the Stanleys improperly introduced evidence of their title insurance, as it would not have affected the outcome. In addition, the Fischers' argument that the trial court improperly required the production of attorney client privileged information relating to their title insurer is not cognizable. The documents have already been produced and there is no evidence in the record that a writ was filed to prevent the production. Interlocutory review by writ is the only adequate remedy in these situations, because once privileged matter has been disclosed there is no way to undo the harm. (See Korea Data Systems Co. v. Superior Court (1997) 51 Cal.App.4th 1513, 1516.)
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondents.
/s/_________
RUSHING, P.J. WE CONCUR: /s/_________
PREMO, J. /s/_________
ELIA, J.