Opinion
B225305
10-25-2011
HEIDEH HILLYER, Plaintiff and Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR HASCO 2007-NC1, Defendant and Respondent.
Law Offices of Jonathan L. Nielsen and Jonathan L. Nielsen for Plaintiff and Appellant. Fidelity National Law Group and Jacky P. Wang for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. LC083941)
APPEAL from a judgment of the Superior Court of Los Angeles County, Richard B. Wolfe and Louis M. Meisinger, Judges. Reversed and remanded.
Law Offices of Jonathan L. Nielsen and Jonathan L. Nielsen for Plaintiff and Appellant.
Fidelity National Law Group and Jacky P. Wang for Defendant and Respondent.
Heideh Hillyer appeals from the judgment entered after the trial court sustained without leave to amend the demurrer of Deutsche Bank National Trust Company as Trustee for HASCO 2007-NC1 (Deutsche Bank) to Hillyer's second amended complaint for cancellation of deed and declaratory relief. We reverse.
Hillyer is appealing only the dismissal of her cause of action for cancellation of deed.
FACTUAL AND PROCEDURAL BACKGROUND
We accept as true all facts properly pleaded in Hillyer's second amended complaint to determine whether the demurrer was properly sustained. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 173, fn. 1; Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182-183 ["reviewing court accepts as true all facts properly pleaded in the complaint in order to determine whether the demurrer should be overruled"]; see Mack v. Soung (2000) 80 Cal.App.4th 966, 971 [all properly pleaded allegations deemed true, regardless of plaintiff's ability to later prove them].) Additionally, we consider information judicially noticed by the trial court at the request of Deustche Bank in support of its demurrer to Hillyer's initial complaint. (See Code Civ. Proc., § 430.30, subd. (a); City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.)
--------
1. Hillyer's Allegations Regarding the Home Purchase and Fraudulent Loan Documents
According to Hillyer's initial complaint filed on December 31, 2008, Frederick Megerdichian told her in October 2006 he could help her purchase a house. After Hillyer found a home located on Leonora Drive, Megerdichian explained she would have to assume the seller's loan and make payments for about three months until he had sufficient documentation to help her refinance the loan. Megerdichian assured Hillyer he could get her a loan with a very low interest rate and affordable payments. Hillyer agreed to purchase the home based on these representations. Hillyer signed numerous documents in connection with the purchase, but did not see or sign any loan documents. She believed no loan documents would be generated until the refinancing occurred.
Several months later Hillyer began receiving loan statements in her name requiring payments that were significantly higher than Megerdichian had told her she would be required to pay on the seller's loan. Hillyer contacted Megerdichian, who told her to make a few payments and assured her he would obtain a better loan.
Several more months passed with no new loan. Hillyer attempted to contact Megerdichian, but he failed to return her telephone calls. The complaint alleged Hillyer subsequently contacted the lender, New Century Mortgage Corporation (New Century), "to let them know she was confused about the loan and wanted a new loan as promised by their agent. They told her that she had to keep making the mortgage payment as . . . is and if she did not pay that she would lose the home." Hillyer, who "was afraid and unsure what to do as she had moved her family into the Subject Property[,] . . . therefore began making the payments the best she could so that the house would not be foreclosed."
Some time later, Hillyer began receiving statements and correspondence from America's Servicing Company directing her to make payments to it. The complaint alleged Hillyer "became very confused as to how this loan even came into place and as to the terms of the loan and now further as to who her lender was. [¶] . . . [Hillyer] sought out documents which would evidence the loan transaction and found two recorded deeds of trust for the Subject Property in the amounts of $496,000 and $124,000 respectively. A simple review of the documents showed that they were blatant forgeries as the signature was nothing like her signature." The documents were purportedly signed at LSB Escrow Inc., and notarized by Haik Alexanians. Hillyer denied signing them or meeting Alexanians.
2. The Chronology of Events According to Judicially Noticed Facts
On September 20, 2006 a grant deed was executed transferring the Leonora Drive property to Hillyer; the grant deed was recorded on December 1, 2006. On November 16, 2006 two deeds of trust securing promissory notes were purportedly signed by Hillyer—one for $496,000 and one for $124,000. Both deeds, which were also recorded on December 1, 2006, identified New Century as the lender.
On July 7, 2008 a notice of default and election to sell was recorded, stating Hillyer owed $34,101.03 on the $496,000 note. The notice indicated Hillyer had stopped making payment beginning April 1, 2008. On September 17, 2008 the $496,000 note and deed of trust were assigned to Deutsche Bank. On December 15, 2008 a notice of trustee sale scheduled for January 2, 2009 was recorded.
3. The Trial Courts's Orders Sustaining Deutsche Bank's Demurrers to the Initial and First Amended Complaints
Deutsche Bank demurred to the initial complaint, which asserted claims including fraud, unfair business practices, cancellation of deed and declaratory relief against Megerdichian, New Century, Deutsche Bank and others. Relying in large part on Rakestraw v. Rodrigues (1972) 8 Cal.3d 67 (Rakestraw), Deutsche Bank contended Hillyer had ratified the forged trust deed and promissory note by making payments and retaining the benefits of the note for several years while knowing the documents had been forged and by failing to take action to set aside the documents or alert anyone to the forgeries until confronted with foreclosure. Deutsche Bank also argued the complaint failed to allege Hillyer had made a valid and viable tender of payment of indebtedness, which it contends is essential to an action to rescind or cancel a transaction.
The trial court sustained Deutsche Bank's demurrer with leave to amend. On May 22, 2009 Hillyer filed a first amended complaint. Although substantially the same as the initial complaint, Hillyer modified the allegation she had continued making loan payments to New Century so "the house would not be foreclosed," explaining instead she "had nowhere else to go and tried her best to make the payments on the loan while she investigated what happened and while she sought out the terms she had been promised for the loan." The court sustained Deutsche Bank's demurrer to the first amended complaint, again with leave to amend.
4. The Second Amended Complaint; the Trial Court's Order Sustaining Deutsche Bank's Demurrer
On October 7, 2009 Hillyer filed a second amended complaint omitting the allegations explaining why she had continued making payments to New Century. The second amended complaint merely alleged, "This was not the loan and especially not the terms that she had been promised and that she wanted. Megerdichian had told her that by making a few payments that she would subsequently be transferred to a lower payment loan. This never happened and when Hillyer realized that her name had been forged and that she was not going to be given the loan that she was told, she sought legal advice and sought to cancel the fraudulent instruments." The second amended complaint included the new allegations Hillyer had "never agreed to nor ratified the terms of the . . . deeds of trust"; "[a]ny payments made by her on said deeds [were] done based on the fraudulent inducement to do so and misrepresentations made by Megerdichian"; and "[w]hen [Hillyer] learned what was truly done with her she immediately sought legal advice and sought to have the instruments cancelled."
On March 4, 2010 the trial court sustained Deutsche Bank's demurrer to the second amended complaint without leave to amend. The court found Hillyer had failed to cure the earlier complaints' deficiencies and had essentially engaged in sham pleading: "As this Court noted in its last ruling: [¶] The instant action is primarily based on the argument that [Hillyer's] signature was forged on deeds of trust and, thus, the deeds, as a matter of law, are void. [Citation.] However, [Hillyer] admits in her First Amended Complaint that she made payments on the loans." "[L]ike the plaintiff in Rakestraw v. Rodrigues, supra, [Hillyer] may have assumed the payments by making payments, and her failure to advise any party of the forgery until a Notice of Sale was served on her could show ratification . . . . [¶] Rather than show how the notes can be cancelled despite the fact that she ratified the notes, [Hillyer has] simply dropped the previous allegations in the current Second Amended Complaint. However, as explained above, the Court cannot disregard these earlier allegations."
The court also found Hillyer had failed to allege facts showing she was prepared to tender the amount due and owing on the note or facts demonstrating Deutsche Bank was not a good faith purchaser.
CONTENTIONS
Hillyer contends whether she ratified the note and deed of trust is a question of fact that cannot be resolved by demurrer, the "tender rule" does not apply to the cancellation of a void instrument and a void deed cannot convey a valid interest to a good faith purchaser.
DISCUSSION
1. Standard of Review
On appeal from an order dismissing an action after the sustaining of a demurrer, we independently review the pleading to determine whether the facts alleged state a cause of action under any possible legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) We give the complaint a reasonable interpretation, "treat[ing] the demurrer as admitting all material facts properly pleaded," but do not "assume the truth of contentions, deductions or conclusions of law." (Aubry, at p. 967; accord, Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., § 452; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
Although a general demurrer does not ordinarily reach affirmative defenses, it "will lie where the complaint 'has included allegations that clearly disclose some defense or bar to recovery.'" (Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 183; accord, Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413, 1421; Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 224.) "Thus, a demurrer based on an affirmative defense will be sustained only where the face of the complaint discloses that the action is necessarily barred by the defense." (Casterson, at p. 183; Favila, at p. 224 [demurrer will not be sustained on ground affirmative defense shown on face of complaint "'unless the complaint alleges every fact which the defendant would be required to prove'"].)
2. The Second Amended Complaint Does Not Demonstrate Hillyer Ratified the Forged Documents as a Matter of Law
"Ratification is the voluntary election by a person to adopt in some manner as his own an act which was purportedly done on his behalf by another person, the effect of which, as to some or all persons, is to treat the act as if originally authorized by him." (Rakestraw, supra, 8 Cal.3d at p. 73.) Ratification may occur expressly or by implication. (Ibid.) For example, ratification occurs when the defendant voluntarily retains benefits with knowledge of the unauthorized nature of the act. (Common Wealth Ins. Systems, Inc. v. Kersten (1974) 40 Cal.App.3d 1014, 1026; see Rakestraw, at p. 73 ["act may be adopted by implication based on conduct of the purported principal from which an intention to consent to or adopt the act may be fairly inferred, including conduct which is 'inconsistent with any reasonable intention on his part, other than that he intended approving and adopting it'"].) "It is essential, however, that the act of adoption be truly voluntary in character. Moreover, there can be no adoption if the act, although voluntary, is done only because the purported principal is obligated to minimize his losses caused by the agents' wrongful act [citation], or because of duress or misrepresentation by the agent [citation]." (Rakestraw, at p. 73.)
With respect to a forged signature, it "may be ratified even when the forger is not the agent of the purported signer." (Common Wealth Ins. Systems, Inc. v. Kersten, supra, 40 Cal.App.3d at p. 1025.) It is ordinarily a question of fact whether a forged signature has been ratified. (Id. at p. 1026.)
Even considering, as the trial court did, the allegations in the initial and first amended complaints that Hillyer had omitted from her second amended complaint, the court erred in sustaining the demurrer and dismissing the action against Deutsche Bank because Hillyer's pleadings do not clearly demonstrate as a matter of law ratification of the allegedly forged signatures on the loan documents. The Supreme Court's decision in Rakestraw, supra, 8 Cal.3d 67, which the trial court believed required it to sustain the demurrer, is distinguishable in several significant respects.
In Rakestraw a wife's signature was forged on a promissory note and deed of trust, which were used to obtain funds for her husband's business venture. (Rakestraw, supra, 8 Cal.3d at pp. 70-71.) Shortly after she endorsed the loan check, the wife learned of the forgeries. (Id. at p. 71.) Against the advice of her attorney, the wife did not report the forgeries to the loan trustee. Instead, she took an active role in the business and sought no remedy for the forgeries until three years later, after both the business and her marriage had failed and she was sued for payment on the promissory note. (Id. at pp. 71-72.) Because the wife did not immediately rescind the loan transaction and did not seek relief until three years after she had discovered the forgeries, the Supreme Court concluded she had "affirmatively endorsed the fraudulent acts" of the forger and his alleged accomplice. (Id. at p. 75 ["it is clear that [wife] elected not to rescind at a time when she was fully informed and had power to do so and had been advised of her rights"].)
Deutsche Bank argues the instant case is analogous to Rakestraw because Hillyer's "own admissions in the Second Amended Complaint make it clear that she had full knowledge of the allegedly fraudulent notes and deeds of trust and that she performed under the allegedly fraudulent notes and deeds of trust with no attempt to dispute their validity until several years later when faced with foreclosure." To be sure, the allegations and judicially noticed facts demonstrate Hillyer made payments for more than 14 months knowing that they were in excess of what she had been told she would be paying under an assumption of the seller's note, as well as for some time after receiving statements indicating there was a loan in her name. Nevertheless, there is nothing in the second amended complaint, the allegations from earlier complaints that the trial court considered, or the judicially noticed facts that demonstrate Hillyer made those payments knowing loan documents existed in her name and that those documents had been forged. Indeed, although the timing is not clear from the initial and first amended complaints, the second amended complaint states Hillyer sought legal advice and attempted to cancel the documents as soon as she learned they were forged. Thus, unlike the wife in Rakestraw, the essential element of knowledge of the unauthorized nature of the act is absent. As a result, ratification—ordinarily a question of fact—is not established as a matter of law based on the allegations in Hillyer's pleadings and the judicially noticeable facts. (See Common Wealth Ins. Systems, Inc. v. Kersten, supra, 40 Cal.App.3d at p. 1026 ["[v]oluntary retention of benefits with knowledge of the unauthorized nature of the act constitutes ratification]," italics added.)
Indeed, the Rakestraw Court emphasized it is essential "the act of adoption be truly voluntary in character," and, even if voluntary, not taken because of duress or misrepresentation by the agent. (Rakestraw, supra, 8 Cal.3d at p. 73.) The allegations here, which include "[a]ny payments made by [Hillyer] on said deeds of trust [were] done based on the fraudulent inducement to do so and misrepresentations made by Megerdichian," do not describe such a circumstance as a matter of law. Although it appears Hillyer may not have been sufficiently motivated to determine the true situation regarding the loan and the allegedly forged documents until there was a notice of foreclosure sale, that circumstance does not support a ruling that her pleading fails to state a cause of action.
Citing Volandri v. Hlobil (1959) 170 Cal.App.2d 656 for the first time at oral argument, Deutsche Bank's counsel argued, even if Hillyer did not know the note had been forged or its essential terms while she was making payments, she nevertheless ratified the fraudulent note by accepting its benefits and knowing she was obligated to make payments in some amount. (See id. at p. 659 ["Ordinarily, the law requires that a principal be apprised of all the facts surrounding a transaction before he will be held to have ratified the unauthorized acts of an agent. However, where ignorance of the facts arises from the principal's own failure to investigate and the circumstances are such as to put a reasonable man upon inquiry, he may be held to have ratified despite lack of full knowledge."].)
Although Volandri is factually distinguishable in several significant respects, we need note only that, like in Rakestraw, supra, 8 Cal.3d 67, ratification was found based on a factual record that had been developed at trial, not, as in the instant case, as a matter of law based on the allegations of a (frankly) unsophisticated pleading. In light of the mandate that complaints should be liberally construed, and respecting the policy that disputes should be resolved whenever possible on their merits (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1149), the trial court erred in concluding the second amended complaint clearly demonstrated Hillyer had ratified the allegedly fraudulent documents. (See Favila v. Katten Muchin Rosenman LLP, supra, 188 Cal.App.4th at p. 224.)
3. The Court Erred in Sustaining the Demurrer on the Grounds Hillyer Failed To Allege She Had Tendered Payment or That Deutsche Bank Was Not a Good Faith Purchaser
Although a bona fide encumbrancer is entitled to rely on a deed that is voidable, it will not retain title if the deed is found to be void. (See Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 378 ["[i]f reconveyance was void, it would have no effect even against a subsequent bona fide purchaser"]; Firato v. Tuttle (1957) 48 Cal.2d 136, 139 ["[i]nstruments which are wholly void cannot ordinarily provide the foundation for good title even in the hands of an innocent purchaser, as where a deed has been forged or has not been delivered"].) Similarly, although "[a] valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust" (Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117), it is not required when seeking to cancel a void instrument (see Smith v. Williams (1961) 55 Cal.2d 617, 620-621).
"A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing." (Schiavon v. Arnaudo Brothers, supra, 84 Cal.App.4th at p. 378.) Thus, because Hillyer's claim for cancellation is based on her claim the deed of trust is void, the trial court erred in sustaining Deutsche Bank's demurrer on the grounds Hillyer failed to allege she made a viable tender of payment or that Deutsche Bank was not a good faith purchaser.
DISPOSITION
The judgment is reversed, and the cause remanded for further proceedings not inconsistent with this opinion. Hillyer is to recover her costs on appeal.
PERLUSS, P. J. We concur:
WOODS, J.
JACKSON, J.