Opinion
E074553
08-18-2021
SAMUEL JOE HILLS, Cross-complainant and Respondent, v. DONNIA LYNN CHEN, Cross-defendant and Appellant.
Milberg & De Phillips and Roy L. Carlson, Jr., for Cross-defendant and Appellant. Sisco & Naramore and Kenneth D. Sisco for Cross-complainant and Respondent.
NOT TO BE PUBLISHED
APPEAL from the Superior Court of San Bernardino County. No. CIVDS1812477 Bryan Foster, Judge. Affirmed.
Milberg & De Phillips and Roy L. Carlson, Jr., for Cross-defendant and Appellant.
Sisco & Naramore and Kenneth D. Sisco for Cross-complainant and Respondent.
OPINION
FIELDS J.
I. INTRODUCTION
Cross-defendant and appellant, Donnia Lynn Chen, and cross-complainant and respondent, Samuel Joe Hills, have competing claims to quiet title to three parcels of real property. During a brief period at the outset of their litigation, Chen obtained a default judgment against Hills and managed to sell one of the three disputed properties before that judgment was set aside. Chen subsequently sought to expunge notices of pending action on the remaining two properties in dispute in order to permit her to sell them while the litigation remained pending; Hills responded by seeking a preliminary injunction prohibiting Chen from selling, encumbering, or disposing of these properties.
The trial court granted Hills's request for preliminary injunction. Chen appeals from this order, arguing the trial court abused its discretion because (1) substantial evidence does not support a finding that Hills is likely to prevail on the merits; (2) substantial evidence does not support a finding that Hills will suffer irreparable harm in the absence of an injunction; (3) even if Hills will suffer harm, the balance of equities weighs against issuing a preliminary injunction; and (4) the trial court abused its discretion in setting the amount of bond for the injunction. We conclude that substantial evidence supports the implied findings in favor of issuing an injunction, the trial court did not abuse its discretion in concluding the balance of equities weighed in favor of granting the injunction; and Chen forfeited any challenge to the amount of the injunction bond for failure to raise the issue in the trial court proceedings.
II. FACTS AND PROCEDURAL HISTORY
A. Pleadings
On May 22, 2018, Chen filed a complaint against Hills seeking to quiet title to three parcels of real property and asserting an additional claim for slander of title. Chen alleged she was the recorded owner of the entire fee simple interest in the three properties in dispute and further alleged that Hills fraudulently recorded mechanic's liens against each property. On May 30, 2018, Chen filed a notice of pending action with respect to each property.
On June 26, 2018, Chen requested entry of default against Hills. On August 16, 2018, Chen requested a default judgment pursuant to Code of Civil Procedure section 585; and on August 20, 2018, the trial court entered a default judgment in favor of Chen. Neither the judgment itself nor the register of actions indicates the trial court held an evidentiary hearing prior to entry of the default judgment. Having obtained a default judgment purporting to quiet title in her name, Chen proceeded to sell one of the three properties in October 2018.
Undesignated statutory references are to the Code of Civil Procedure.
On December 26, 2018, the trial court granted a motion to set aside the default judgment, and Hills's proposed answer and cross-complaint were deemed filed as of that date. Hills's cross-complaint asserted a competing cause of action to quiet title to the three disputed properties, as well as causes of action for fraud in fact, fraud in the inducement, and conversion.
In January 2019, Hills recorded notices of pending action with respect to the remaining two, unsold properties in dispute. The notices were not served on Chen, and Chen became aware of the notices on August 6, 2019, while attempting to sell a second property. On August 12, 2019, Chen moved to expunge these notices, primarily on the grounds that they were procedurally defective.
On August 28, 2019, in response to the motion to expunge, Hills filed an application seeking a temporary restraining order and requesting the trial court issue an order to show cause regarding issuance of a preliminary injunction. Hills's notice described the requested injunction as one that would generally prevent Chen from selling, encumbering, or otherwise disposing of the two remaining properties subject of the parties' quiet title claims.
The notice further stated that the specifics of the requested injunction were “set forth in the concurrently filed proposed order.” However, the record on appeal does not contain a copy of a proposed order concurrently filed with the application. While Hills's appendix indicates that a proposed order subsequently filed on September 6, 2019, is included at pages 249, pages 248 through 251 appear to have been omitted from the appendix submitted to this court.
B. Application for Preliminary Injunction
In support of his application for preliminary injunction, Hills submitted a declaration in which he attested that the three properties in dispute were originally intended as joint investments between Hills and his mother. While his mother paid the full purchase price for each property, Hills determined which properties to purchase and handled the upkeep, management, and repairs of the properties following the purchase. With respect to the two remaining, unsold properties subject of his request for preliminary injunction, Hills attached two quitclaim deeds showing that his mother transferred 50 percent ownership to Hills as a joint tenant following the purchase of the properties. According to Hills, title to all three properties was eventually transferred to him with the intent of protecting the investments from the creditors of his mother's husband.
Hills further declared that sometime in 2015, he became reacquainted with Chen, who is his estranged daughter, and he desired to reconcile and rekindle a relationship with her. Hills stated that he and Chen reached an agreement in which he would transfer title to the three properties to Chen and, in exchange, Chen would grant him a power of attorney to exercise full power of ownership, possession, transfer, management, and receipt of rental income with respect to the properties during his lifetime. According to Hills, the intent of the parties was to allow the properties to effectively remain within his ownership, possession, and control until his death, at which time they would pass to Chen. Hills attached a power of attorney, executed by Chen the week prior to his execution of the recorded quitclaim deeds, granting Chen title to the three properties to establish that the parties in fact had such an agreement.
According to Hills, his agreement with Chen was not intended to transfer any present interest in the properties, and Chen never paid any consideration in exchange for title to the properties. Hills continued to manage the three properties, collect rents, correspond with tenants, make repairs and upgrades, and pay the property taxes following transfer of title. In February 2017, Hills's mother passed away. Thereafter, Hills was required to deal with eviction proceedings against persons who had been living in one of the properties with his mother. However, shortly after Hills succeeded on the eviction matter, Chen revoked the power of attorney.
C. Opposition to Request for Preliminary Injunction
In the interim, the trial court entered an order purporting to grant the request for preliminary injunction. However, the trial court subsequently clarified that it had intended to grant a temporary restraining order and not a preliminary injunction. As a result, the trial court, on its own motion, reset the matter for a hearing on the request for preliminary injunction and provided the parties an opportunity to brief the issue.
Chen submitted her own declaration in opposition to the request for preliminary injunction. Chen declared she was the record owner of the entire fee simple interest in two of the three properties in dispute, and she further declared that she had been the record owner of the entire fee simple interest in the third property until she sold it in October 2018. Chen confirmed that, of the two remaining disputed properties, one was in escrow, and the other had been listed for sale.
Chen confirmed that all three properties had been purchased by her grandmother in 2012 and 2013. Chen stated that, in January 2016, her grandmother asked to transfer ownership of the properties to her, and Chen agreed to accept title to the properties. Chen did not otherwise explain the purpose or circumstances of the transfer. According to Chen, Hills executed the quitclaim deeds transferring title to the three properties to Chen at the direction of Chen's grandmother.
Chen confirmed that she executed a power of attorney in favor of Hills prior to transfer of title to the properties, but she stated that her intent was to have Hills act as her agent as a matter of convenience. Chen stated she never had any conversations with Hills regarding any intent that Hills continue to hold the present interests in the properties or that the interests in the three properties be transferred to Chen only upon Hills's death.
D. Hearing and Ruling on Request for Preliminary Injunction
On November 4, 2019, the trial court held a hearing on Hills's request for preliminary injunction. Neither party offered any additional argument, and the trial court took the matter under submission. The trial court granted Hills's request for a preliminary injunction. The record contains only a written document filed by the trial court entitled “amended ruling, ” stating it was granting Hills's request for preliminary injunction. Chen appeals from this order granting a preliminary injunction.
III. DISCUSSION
A. The Record is Inadequate To Determine Whether the Appeal is Moot
Initially, we address Hills's argument that the entire appeal should be dismissed as moot because his cross-complaint in the underlying action has been amended on at least two occasions while this appeal was pending. We believe the record is inadequate to determine the merits of this argument.
“It is well settled that an appellate court will decide only actual controversies and that a live appeal may be rendered moot by events occurring after the notice of appeal was filed. We will not render opinions on moot questions or abstract propositions, or declare principles of law which cannot affect the matter at issue on appeal.” (Building a Better Redondo, Inc. v. City of Redondo Beach (2012) 203 Cal.App.4th 852, 866-867.) However, “ ‘the general rule governing mootness becomes subject to the case-recognized qualification that an appeal will not be dismissed where, despite the happening of the subsequent event, there remain material questions for the court's determination.' ” (Biosense Webster, Inc. v. Superior Court (2006) 135 Cal.App.4th 827, 835.) “[T]he burden of persuasion with respect to mootness is on the respondent....” (Parkford Owners for a Better Community v. County of Placer (2020) 54 Cal.App.5th 714, 721.)
Here, it is undisputed that Hills's cross-complaint has been subsequently amended on at least two occasions during the pendency of this appeal. However, the record fails to sufficiently disclose the specific terms of the trial court's injunction. The order appealed from merely states it is granting Hills's request for a preliminary injunction. While the notice accompanying Hills's request for a preliminary injunction generally described the requested injunction as one that would prohibit Chen from selling, encumbering, or otherwise disposing of the remaining two properties in dispute, it equally stated that the specifics of the request were set forth in a concurrently filed proposed order. That proposed order appears nowhere in the record before us.
While not entitled as such, the document was clearly an order subject to appeal. “[A]n order is a document which contains a direction by the court that a party take or refrain from action, or that certain relief is granted or not granted [citations]; and which is either entered in the court's permanent minutes or signed by the judge and stamped ‘filed.' ” (Shpiller v. Harry C's Redlands (1993) 13 Cal.App.4th 1177, 1179.)
Thus, while it is certainly possible that Hills's amended cross-complaint could render this appeal moot, absent something in the record that sets forth precisely what acts have been enjoined, this court is unable to determine whether or to what extent material issues might remain for consideration on appeal. Thus, we conclude Hills has not met his burden to establish this appeal is moot, and we proceed to consider the merits of the appeal. However, as we explain below, we find no error warranting reversal.
The question of whether an appeal is moot appears frequently in the context of appeals from orders pertaining to preliminary injunctions because perfecting an appeal from such an order “does not stay further trial court proceedings on the merits.” (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 191.) Thus, the trial court's subsequent determination of issues on their merits may render an order granting or denying a preliminary injunction moot. (See Korean American Legal Advocacy Foundation v. City of Los Angeles (1994) 23 Cal.App.4th 376, 399 [sustaining of demurrer to causes of action that would have supported injunction rendered appeal moot]; National Asso. of Wine Bottlers v. Paul (1969) 268 Cal.App.2d 741, 747 [decision regarding permanent injunction rendered appeal from order granting preliminary injunction moot].) Further, where a preliminary injunction has been granted, an amended pleading may be used to further support the grounds for the injunction. (Handyspot Co. of Northern California v. Buegeleisen (1954) 128 Cal.App.2d 191, 194 [“The rule is well settled in California that a court may grant a preliminary injunction... [and] [a]ny defects which might appear... may be corrected by the filing of an amended complaint showing good grounds for the injunction.”]; County of Tehama v. Sisson (1907) 152 Cal. 167, 178-179 [“[I]t is within the discretion of the court to permit the filing of an amended bill to support a preliminary injunction already issued, and that if the amended bill shows good ground for the injunction it is not error to refuse to dissolve such writ for the mere reason that the original bill may have been defective.”].)
Additionally, Chen disputes the appeal is moot in reply. This would strongly imply that whatever the scope of the trial court's preliminary injunction, Chen believes the preliminary injunction would still apply to the current operative pleading. Otherwise, Chen could have more quickly obtained the very relief she seeks on appeal by dismissing the appeal and bringing a motion in the trial court to dissolve or modify the preliminary injunction based upon the changed circumstances presented by the amended cross-complaint.
B. General Legal Principles and Standard of Review
“ ‘We review an order granting a preliminary injunction, under an abuse of discretion standard, to determine whether the trial court abused its discretion in evaluating the two interrelated factors pertinent to issuance of a preliminary injunction-(1) the likelihood that the plaintiffs will prevail on the merits at trial, and (2) the interim harm that the plaintiffs are likely to sustain if the injunction were denied as compared to the harm the defendant is likely to suffer if the preliminary injunction were issued.' ” (City of Corona v. Naulls (2008) 166 Cal.App.4th 418, 427.) “The party challenging the superior court's order has the burden of making a clear showing of such an abuse.” (Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 739.)
However, “[t]he abuse of discretion standard is not a unified standard; the deference it calls for varies according to the aspect of a trial court's ruling under review. The trial court's findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious.” (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711-712; see County of Kern v. T.C.E.F., Inc. (2016) 246 Cal.App.4th 301, 316.) Additionally, in the context of a preliminary injunction, “[t]he trial court [is] not required to prepare a statement of decision or explain its reasoning, ” and “[f]or purposes of appellate review, we therefore presume the court considered every pertinent argument and resolved each one consistently with its [order]....” (Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1450-1451.)
Thus, we imply findings in favor of the order, review those findings for substantial evidence, and independently determine the correct application of law to the factual findings supported by substantial evidence to determine if the trial court erred. Further, to the extent the claim of error rises from the trial court's weighing of equitable factors otherwise supported by substantial evidence, we reverse only if the trial court's decision was arbitrary or capricious.
C. The Trial Court Did Not Err in Considering Hills's Likelihood of Prevailing on the Merits
In ruling on Hills's request for preliminary injunction, the trial court concluded that Hills's evidence was sufficient to show a likelihood of prevailing on the merits of his quiet title claim based upon a theory of fraud. On appeal, Chen argues this finding was not supported by substantial evidence. We conclude substantial evidence in the record supports this finding.
1. Substantial Evidence Supports Each Element of Promissory Fraud
At the time of the trial court's grant of the preliminary injunction, Hills's cross-complaint acknowledged that Chen held legal title to the three properties in dispute but alleged causes of action to quiet title, fraud in fact, fraud in the inducement, and conversion.
“[A]s a general matter[, ] an action to quiet title cannot be maintained by the owner of equitable title as against the holder of legal title... [¶]... when legal title has been acquired through fraud any number of remedies are available and appropriate. These remedies include quieting title in the defrauded equitable title holder's name....” (Warren v. Merrill (2006) 143 Cal.App.4th 96, 113-114.) Thus, to the extent Hills's evidence showed a likelihood of prevailing on his fraud claims, such a showing would equally support a likelihood of prevailing on his quiet title claims.
As relevant here, a claim for fraud may be premised upon a false promise. “Promissory fraud is a subspecies of fraud, and an action may lie where a defendant fraudulently induces the plaintiff to enter into a contract, by making promises he does not intend to keep.” (Reeder v. Specialized Loan Servicing LLC (2020) 52 Cal.App.5th 795, 803; see Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “ ‘The elements of promissory fraud... are (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promise[e].' ” (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1498.)
Here, Hills's declaration stated: the parties entered into an oral agreement, whereby Hills would transfer title to the properties to Chen and, in exchange, Chen would provide Hills a power of attorney, giving him the right to control, manage, transfer, or sell the properties during his lifetime; Hills reasonably relied on this understanding to transfer title to the three properties to Chen; Chen failed to perform her promise by revoking the power of attorney; and Hills was harmed because Chen took possession of the three properties without otherwise providing any consideration. Thus, Hills's declaration provided direct evidence in support of each element of a claim for promissory fraud, with the exception of the elements related to Chen's intent.
However, “[t]he proof of intent... ‘[f]rom the very nature of the inquiry... must necessarily be largely or wholly circumstantial.' ” (David v. Hermann (2005) 129 Cal.App.4th 672, 686; see Tenzer v. Superscrope (1985) 39 Cal.3d 18, 30-31 (Tenzer) [“[F]raudulent intent must often be established by circumstantial evidence.”].) Such proof “ ‘may come by inference from circumstances surrounding the transaction, the relationship, and interest of the parties,' ” as well as “subsequent conduct.” (Miller v. National American Life Ins. Co. (1976) 54 Cal.App.3d 331, 338-339.) In addition to Chen's nonperformance of the alleged agreement, Hills produced evidence to show Chen executed a revocable, as opposed to irrevocable, power of attorney. One inference that can be drawn from this fact is that Chen chose to use a revocable power of attorney because she never intended to keep her alleged promise to permit Hills to exercise power of attorney for the duration of his life. While a trier of fact is not required to draw this inference, for purposes of this appeal, “ ‘ “we must interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court's order.”' ” (ReadyLink Healthcare v. Cotton (2005) 126 Cal.App.4th 1006, 1016.)
Nonperformance of a promise creates an inference that a promise was made without intention of performing it (see Wilkenson v. Linnecke (1967) 251 Cal.App.2d 291, 293), but such evidence standing alone is not sufficient and must be accompanied by something more in order to support a claim for promissory fraud (Tenzer, supra, 39 Cal.3d at pp. 30-31).
Thus, the record contains substantial evidence in support of each element of a claim for promissory fraud which, if credited, would support a request to quiet title or provide other equitable relief to Hills on his cross-complaint. As a result, we find no error warranting reversal based upon the trial court's finding that Hills was likely to prevail on the merits of his cross-complaint.
2. Chen's Additional Arguments Are Not Grounds for Reversal on Appeal
On appeal, Chen argues that Hills's declaration was inconsistent with other acts taken by Hills, and Hills's version of events was not credible. Chen also argues that, even if Hills's declaration is found credible, the evidence established that Chen performed her promise under the alleged agreement by delivering a revocable power of attorney and, thus, Hills cannot prevail on a claim for fraud. Neither of these arguments is grounds for reversal.
First, “ ‘ “[w]here the evidence before the trial court was in conflict, we do not reweigh it or determine the credibility of witnesses on appeal. ‘[T]he trial court is the judge of the credibility of affidavits filed in support of the application for preliminary injunction and it is that court's province to resolve conflicts.' ”' ” (City of Corona, supra, 166 Cal.App.4th at p. 427.) Even when presented by a declaration, “ ‘ “if the evidence on the application is in conflict, we must interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court's order.”' ” (Oiye v. Fox (2012) 211 Cal.App.4th 1036, 1049.) Thus, to the extent the evidence before the trial court may have been inconsistent, contradictory, or suggested lack of credibility, these were issues for the trial court to resolve and are not grounds for reversal on appeal.
Second, the fact that the power of attorney delivered by Chen did not contain a provision making it irrevocable does not necessarily shield Chen from potential liability for her act of revocation. Where a power of attorney “ ‘forms part of a contract, and is security for money, or for the performance of an act which is deemed valuable, it is generally made irrevocable in terms, or, if not so, is deemed irrevocable in law.' ” (Todd v. Superior Court of San Francisco (1919) 181 Cal. 406, 416.) Here, Hills clearly alleged the power of attorney was security for performance of an act of value-transfer of title to the properties. Thus, if a trier of fact were to credit Hills's testimony that the parties' agreement included a promise that he would be permitted to exercise the power of attorney throughout the duration of his life, the power of attorney delivered by Chen would be deemed irrevocable, and Chen's act of revocation could still constitute nonperformance in support of a claim for promissory fraud.
Ultimately, while these arguments may provide Chen with substantive defenses at the time of trial, they do not establish an abuse of discretion in the trial court's determination that Hills was likely to prevail on the merits of his cross-complaint for purposes of issuing a preliminary injunction.
D. The Trial Court Did Not Err in Concluding the Balance of Harms Weighed in Favor of Granting a Preliminary Injunction
On appeal, Chen also contends the trial court abused its discretion in balancing the competing harm to the parties. Specifically, Chen contends that any finding that Hills will suffer irreparable injury in the absence of an injunction is not supported by substantial evidence; that even assuming irreparable injury to Hills, it was outweighed by the comparative injury to Chen from issuance of an injunction; and that the trial court should have denied an injunction based upon the equitable doctrine of unclean hands. We conclude that any implied finding Hills will suffer irreparable harm is supported by substantial evidence, and the trial court did not abuse its discretion in concluding the balance of harms favored granting an injunction.
1. Substantial Evidence Supports a Finding that Hills Will Suffer Irreparable Harm
Here, Chen argues Hills failed to support any claim of irreparable harm with admissible evidence and, as a result, it should be presumed monetary damages are adequate to compensate him for any harm. We disagree.
It is apparent from the nature of the competing quiet title claims that the dispute between the parties involves claims to real property. There is a statutory presumption that injury from loss of the property cannot be adequately compensated by monetary damages. “It is to be presumed that the breach of an agreement to transfer real property cannot be adequately relieved by pecuniary compensation. In the case of a single-family dwelling which the party seeking performance intends to occupy, this presumption is conclusive. In all other cases, this presumption is a presumption affecting the burden of proof.” (Civ. Code, § 3387; see Real Estate Analytics, LLC v. Vallas (2008) 160 Cal.App.4th 463, 473-474.)
Here, Hills's declaration stated that he originally purchased the three disputed properties with the intent to eventually inhabit one of the properties and rent the remaining two. His claim of an intent to eventually occupy one of the properties creates a conclusive presumption that monetary damages would be inadequate if Chen were permitted to sell the properties prior to resolution of quiet title claims on the merits.
For this reason, Chen's reliance on Jessen v. Keystone Sav. & Loan Ass'n. (1983) 142 Cal.App.3d 454 is misplaced. In that case, the Court of Appeal held that denial of an injunction was appropriate with respect to two condominium units that “had been price tagged and were being openly marketed” prior to the time litigation ensued. (Id. at pp. 457-458.) In this context, the Court of Appeal upheld denial of an injunction on the ground that monetary damages would be sufficient because the property was held purely for investment purposes, and the party seeking the injunction had already indicated its intent to sell the property at a marketed monetary value prior to litigation. (Ibid.) However, the Court of Appeal equally recognized that, where the evidence suggests a property is being held for “undefined investment purposes, a ‘use' potentially including the owners' personal occupancy, renting until an appropriate market climate, or for other purposes within their total investment plan, ” it would not be an abuse of discretion to grant an injunction to prevent sale of the property pending litigation. (Id. at p. 458.)
Moreover, even if we were to disregard Hills's testimony and assume, as Chen claims, that the properties were held primarily for investment purposes, Chen's argument would still be without merit. By its very terms, even where a property is not held with the intent to occupy it, Civil Code section 3387 still operates as a presumption affecting the burden of proof. “The effect of a presumption affecting the burden of proof is to impose upon the party against whom it operates the burden of proof as to the nonexistence of the presumed fact.” (Evid. Code, § 606.) Thus, contrary to Chen's claim on appeal, it was not Hills's burden to show the inadequacy of monetary damages. Instead, because the claim involved the right to real property, Chen bore the burden to produce evidence to overcome the statutory presumption.
The record here indicates that Chen made no attempt to offer evidence on this issue in the trial court proceedings, instead advancing the same argument she does on appeal claiming, incorrectly, that Hills failed to meet his burden of proof on the issue. Accordingly, Chen has failed to show the trial court erred to the extent it concluded Hills would suffer irreparable harm. Hills's declaration provided direct evidence upon which the trial court could rely to find irreparable harm; and, even in the absence of such evidence, Civil Code section 3387 compelled such a finding in Hills's favor in the absence of any attempt by Chen to overcome the statutory presumption.
2. Chen Has Not Identified a Cognizable Competing Harm
Chen also argues that the balance of harms did not favor granting an injunction because “the likely harm from an injunction is at least equal if not greater than the harm of not issuing an injunction.” As we explain, Chen's claim of irreparable harm flowing from the issuance of a preliminary injunction is without merit because Chen never had a valid right to marketable title to the three properties at any time since the inception of this litigation. Thus, she has not shown that harm, let alone irreparable harm, would flow from the issuance of an injunction, and the trial court could not have abused its discretion in balancing the competing harm to the parties.
“To qualify as marketable a title must embrace both the legal and equitable estates, must be free from any encumbrance, must be defensible and salable.” (Palos Verdes Corp. v. Housing Authority of County of Los Angeles (1962) 202 Cal.App.2d 827, 838.)
Here, Chen filed an action to quiet title to the three properties on May 22, 2018. As a result, Chen was required by statute to “immediately” file and record a notice of pending action, also commonly referred to as a lis pendens, with respect to all three properties. (§ 761.010, subd. (b); Carr v. Rosien (2015) 238 Cal.App.4th 845, 851 [“A lis pendens may be filed in an action in which a real property claim is alleged” but “must be filed in a quiet title action”].) These statutorily required notices are intended to preserve the status quo during a quiet title dispute and should have effectively prevented the sale of any of the properties until resolution of the claims on the merits. (See Malcolm v. Superior Court of Santa Clara County (1981) 29 Cal.3d 518, 523, fn. 2 [“As a practical matter, the filing of a lis pendens usually clouds the title to the property and prevents its transfer until the litigation is resolved or the lis pendens is expunged.”].) Thus, regardless of Hills's request for a preliminary injunction, the quiet title statutes should have effectively precluded Chen from selling any of the properties at issue while the litigation was pending.
Chen, here, apparently avoided the statutory protections intended to preserve the status quo in quiet title actions by requesting and obtaining a default judgment. However, in a quiet title action, judgment cannot be entered by default, and it is well established that any default judgment in a quiet title action is void on its face. (§ 764.010; Paterra v. Hansen (2021) 64 Cal.App.5th 507, 536 [A default judgment in a quiet title action is “void as beyond the court's fundamental powers to provide a final determination on title.”]; see Harbour Vista, LLC v. HSBC Mortgage Services Inc. (2011) 201 Cal.App.4th 1496, 1508 [The trial court cannot “adjudicate title on prima facie evidence, as would be allowed in an ordinary default prove-up.”]; Nickell v. Matlock (2012) 206 Cal.App.4th 934, 947 [“[T]he unambiguous language of section 764.010 precludes a traditional default prove-up in quiet title actions and imposes an absolute ban on a ‘judgment by default' in such actions.”].) In turn, a judgment void on its face “can be neither a basis nor evidence of any right whatever.... [It] is a nullity and all acts performed under it are void.” (Texas Co. v. Bank of Am. Nat'l Trust & Sav. Ass'n (1935) 5 Cal.2d 35, 41.)
Thus, Chen should not have been permitted to obtain a default judgment in the first instance, any such judgment was void, and any void judgment could not lift the cloud on title created by Chen's prior recorded notices of pending action. Simply put, Chen should not have been able to clear title by means of a default judgment, notwithstanding the fact that she apparently was able to do so.
While this void judgment was subsequently set aside on other grounds, Chen never recorded a new notice of pending action. Instead, the record indicates Chen sought to preserve the advantage she had apparently obtained through the void judgment by seeking to expunge notices of pending action subsequently recorded by Hills for the very purpose of completing the sale of the remaining properties pending resolution of the competing quiet title claims-something she would otherwise have been unable to do had she not obtained a void judgment in the first place.
While the record is not entirely clear on this point, Chen claimed she was able to sell one of the properties during the brief period between entry of the default judgment and the time the default judgment was set aside. Chen further admitted she was effectively prevented from completing a sale of the second property when Hills recorded a new notice of pending action after the default judgment was set aside. Accordingly, we presume Chen utilized the default judgment in order to clear title to the properties allowing her to sell them.
Given the above authorities, Chen's claim that she will suffer comparatively greater harm if prohibited from selling the properties or from exposure to a breach of contract action is without merit. Chen does not suffer irreparable injury from being enjoined from performing an act that she has no legal right to perform in the first instance.
We are also unpersuaded that Chen will suffer harm from being exposed to a breach of contract action for failure to complete the sale of one of the properties. According to the evidence in the record, Chen was represented by an attorney who “regularly handle[s] real estate matters and real estate litigation.” Thus, we must presume that Chen was fully aware that a default judgment in a quiet title action could not have provided her clear marketable title in any of the properties at the time she negotiated any sale and further presume that any contract for sale of the properties was made with this understanding. (Bohem v. Spreckels (1920) 183 Cal. 239, 248 [“Everyone is presumed to know the law, and it must therefore be presumed that the parties to [an] agreement contracted with [that] knowledge....”].) Further, both Chen and her counsel were certainly aware that the default judgment had been set aside as of December 26, 2018. Thus, we must also presume that Chen complied with her duty to disclose to any potential buyer that her title to the property was clouded by pending litigation, notwithstanding any contrary representation in a title report (see Holmes v. Summer (2010) 188 Cal.App.4th 1510, 1518-1519 [seller has duty to disclose facts materially affecting value or desirability of property]) and, as a result, will not face any breach of contract claim because any buyer agreed to purchase the property subject to this contingency. To the extent Chen failed to make such disclosure, her liability would arise from her own failure to disclose and not from any harm caused by the trial court's injunction.
Having clarified that the quiet title statutes should have precluded Chen from selling the properties pending resolution of Chen's own quiet title claims on the merits, it is apparent that the trial court did not abuse its discretion in concluding that the balance of harms supported the issuance of an injunction preventing Chen from selling the remaining two properties in dispute. It is a “foundational legal principle” that the “general purpose of a preliminary injunction is to preserve the status quo pending a final adjudication of the claims on the merits.” (O'Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1472.) When viewed in the correct context, the trial court's injunction did nothing more than place the parties in the position they were in at the outset of this litigation and in which they should have remained, had Chen not obtained a void judgment in violation of the quiet title statutes and apparently relied on that void judgment to clear title to the properties.
3. Equitable Defenses Cannot Be Used To Circumvent Statutory Law
Finally, Chen asserts that the trial court should have denied a preliminary injunction because Hills came to the court with unclean hands. However, “ ‘[w]hile equitable relief is flexible and expanding, its power cannot be intruded in matters that are plain and fully covered by positive statute. A court of equity will not lend its aid to accomplish by indirect action what the law or its clearly defined policy forbids to be done directly.' ” (Robin v. Crowell (2020) 55 Cal.App.5th 727, 753.) As we have already detailed, the quiet title statutes were designed to prevent Chen from obtaining marketable title and preclude the sale of any properties in dispute while the quiet title claims remained unresolved. Principles of equity cannot be applied for the purpose of achieving an outcome contrary to that intended by statutory law. Thus, we find no abuse of discretion to the extent the trial court declined to apply the doctrine of unclean hands to deny issuance of an injunction in this case.
E. Chen Has Forfeited Any Claim That the Injunction Bond Is Inadequate
On appeal, Chen also argues that the amount of bond for the injunction is inadequate. We conclude this argument is forfeited for failure to raise the issue in the trial court below.
“ ‘As a general rule, “issues not raised in the trial court cannot be raised for the first time on appeal.”' ” (Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5th 252, 264.) In the context of an injunction bond, where a party is aware of the requesting party's position regarding issuance of an injunction bond but does not address the issue in opposition or at the time of hearing, any alleged error with respect to the bond is forfeited for purposes of appeal. (Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 747-749 [claimed error regarding trial court's failure to issue injunction bond upon granting an injunction forfeited].)
Here, Hills explicitly argued that a minimal bond should be imposed for issuance of any preliminary injunction in his moving papers with the trial court. Chen's opposition in the trial court did not address this argument or otherwise propose an alternative amount of bond. Nor did Chen address the issue at the time of oral argument. Clearly, had this issue been contested by Chen in the trial court proceedings, it would have allowed the trial court to consider competing arguments with respect to the amount of any bond and permit Hills to develop a further evidentiary record on the matter if necessary. Thus, the failure to raise the issue in the trial court below prevented the matter from being fully developed in the record, and we conclude the issue has been forfeited.
IV. DISPOSITION
The order is affirmed. Respondent to recover his costs on appeal.
We concur: McKINSTER Acting P. J.MILLER J.