Opinion
H040911
11-24-2015
EILEEN KEMPIS, Plaintiff and Appellant, v. NCB, FSB, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 Clara County Super. Ct. No. 1-11-CV199921)
Plaintiff Eileen Kempis appeals from a judgment entered in favor of respondent NCB, FSB (NCB) in her action for quiet title, declaratory relief, and slander of title. Plaintiff maintains that she was the rightful owner of a membership interest in the cooperative residential community where she lived. Consequently, plaintiff contends, NCB acquired no security interest in the property when it approved a loan to plaintiff's stepmother, Jacqueline Kempis, purportedly secured by Jacqueline's interest in the property, without first ascertaining that Jacqueline held a valid membership interest. We will affirm the judgment.
Background
Because this appeal arises from the sustaining of a demurrer, our summary of the factual history is drawn primarily from the operative pleading, plaintiff's first amended complaint. Toward this end "we accept as true the properly pleaded material factual allegations of the complaint, together with facts that may properly be judicially noticed." (Crowley v. Katleman (1994) 8 Cal.4th 666, 672; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.)
In undertaking our review, however, we observe that plaintiff has completely disregarded the rules governing appellate briefs by failing to support her factual assertions with citations to the record. California Rules of Court, rule 8.204(a)(1)(C) requires each brief to "[s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears." (Italics added.) The entire statement of the case contains exactly one reference—to the entire first amended complaint—and her statement of facts contains only sporadic record citations, asserting many facts with no support whatsoever in the complaint from which they purportedly derive.
A brief that does not comply with rule 8.204(a)(1)(C) may be struck and returned for correction. (Cal. Rules of Court, rule 8.204(e).) Alternatively, "[b]ecause '[t]here is no duty on this court to search the record for evidence' [citation], [we] may disregard any factual contention not supported by a proper citation to the record." (Grant-Burton v. Covenant Care, Inc. (2002) 99 Cal.App.4th 1361, 1379.) We elect the second option and will therefore disregard plaintiff's entire statement of facts and statement of the case.
Plaintiff lived in Twin Pines Cooperative Community, Inc. (Twin Pines), a residential community in Santa Clara. The community owned the property but issued stock and a membership interest to each of its residents. Plaintiff's parents, Richard and Mary Kempis, owned a membership interest and resided there with plaintiff before their divorce in 1987. Richard moved from the property in 1991, while Mary and plaintiff remained.
In March 1998 Mary died. Plaintiff continued to live at the property, paying the required membership fees. In December 1998 Twin Pines issued one common share of the company stock to Richard, evidencing a membership interest. On August 25, 2003 Richard transferred 99 percent of his interest to his second wife, Jacqueline. Jacqueline obtained a loan from NCB that day, secured by a membership interest that plaintiff maintained was invalid, based on Jacqueline's false representation in an occupancy agreement that she occupied the property. Jacqueline defaulted on the loan in September 2010, and NCB issued a notice of default.
Plaintiff brought suit in 2011 to revoke any stock issued to Richard or Jacqueline and establish her own membership interest, as the intestate successor of Mary's interest. In her original complaint plaintiff sought (1) a quiet title judgment (against NCB, Twin Pines, and Jacqueline) as "the rightful holder of and owner of the membership interest"; (2) declaratory relief (against NCB, Twin Pines, Richard, and Jacqueline); (3) injunctive relief (against only NCB, to prevent a foreclosure sale); and (4) damages for slander of title (against Richard, Jacqueline, NCB, and Twin Pines), negligence (against Twin Pines for erroneously giving Richard a share of Twin Pines stock without his being an occupant), and conversion (against Richard and Jacqueline for converting plaintiff's equity for their own use by obtaining the loan).
On September 5, 2012 Twin Pines obtained an order granting it summary judgment. The superior court ruled that the membership interest had been held by Richard and Mary in joint tenancy, which did not dissolve in 1987 upon their divorce. Consequently, Twin Pines had properly recognized Richard as the sole owner of the membership interest when Mary died. The court also noted that plaintiff herself had not complied with a provision of the community bylaws by assuming in writing the terms of the occupancy agreement within 60 days of Mary's death. On January 25, 2013, the court denied plaintiff's motion for a new trial, and on April 3, 2013, it entered judgment for Twin Pines. Plaintiff's appeal from that judgment was dismissed by this court upon the unopposed motion of Twin Pines.
Plaintiff served a first amended complaint on NCB, Richard, Jacqueline, and Twin Pines on December 6, 2013. The causes of action were the same, but this time, in addition to asserting that she was the "rightful holder of and owner of the membership interest, plaintiff claimed "an equitable interest in the membership and the Property, based upon [Richard's] promises of transfer of Mary's interest in the membership to her and in consideration of plaintiff's maintaining the unity and her payment of all expenses to Twin Pines since her mother died in 1998." As to NCB, plaintiff also alleged that NCB had failed to "make reasonable inquiry as to whether defendant Jacqueline actually occupied the Property," as a valid membership required. NCB "knew or should have known" that Jacqueline was not a valid owner of a membership interest, which "legally and equitably belonged to plaintiff." Consequently, plaintiff sought a judicial declaration that Jacqueline's loan was not secured by a membership interest in the property. This assertion was also the basis of plaintiff's allegation of slander of title, this time against only Richard, Jacqueline, and NCB.
NCB demurred to the first amended complaint on January 17, 2014 on both procedural and substantive grounds. NCB raised the doctrines of res judicata, collateral estoppel, and law of the case to assert a bar to plaintiff's first amended complaint, noting that the same claims had been determined in the summary judgment granted to Twin Pines. NCB further asserted that plaintiff could not prevail in a quiet title action because she lacked her own title, having at best an equitable interest in the cooperative. Her reliance on an inherited interest from her mother could not succeed because Mary's interest had passed to Richard under joint tenancy. NCB further argued that its interest as a "bona fide encumbrancer for value" had priority over any unrecorded interest plaintiff might have. From the allegations in the complaint, plaintiff's "hostile" possession, of which NCB had no notice, could have been based simply on her father's permission to live in the unit. Slander of title must also fail, according to NCB, because plaintiff had not alleged malice, and injunctive relief was only a remedy, not a valid cause of action.
In her opposition, plaintiff asserted that NCB did not have a real property lien because the interest that secured the loan to Jacqueline was only personal property, not real property. Plaintiff defended the slander of title claim by arguing that a plaintiff's burden was only to prove malice, not to allege it in the complaint. Plaintiff insisted that NCB could not be a bona fide encumbrancer, because Jacqueline did not execute an occupancy agreement until after the loan was made, and even then she falsely stated that she resided in the unit. Without that occupancy, Jacqueline could not have been a valid member and thus NCB's "purported lien on Jacqueline's interest is defective." Finally, plaintiff challenged NCB's reliance on law of the case, res judicata, and collateral estoppel.
Plaintiff also raised her own procedural grounds in her opposition, asserting untimeliness of the demurrer. But in its reply NCB pointed out that plaintiff's first amended complaint was not verified until January 17, 2014, the same day NCB filed its demurrer.
The court sustained the demurrer without leave to amend as to all causes of action asserted against NCB. The court agreed with NCB that collateral estoppel applied to the issues resolved in the prior summary judgment ruling, particularly the finding that Richard had acquired the entire interest in the property after Mary's death. From the ensuing judgment on March 11, 2014, plaintiff brought this timely appeal.
Discussion
On appeal, plaintiff renews her opposition to NCB's assertion of res judicata, collateral estoppel, and law of the case. Addressing the merits of NCB's defense, she contends that NCB is neither a secured creditor nor a bona fide encumbrancer, because it had constructive notice of Jacqueline's defective membership, as she did not occupy the property. We need not decide the applicability of the procedural doctrines on which NCB relied, because our independent review compels the conclusion that NCB was entitled to judgment on the merits of plaintiff's claims against it.
1. Standard and Scope of Review
Settled rules govern our review of the judgment. "On appeal from a dismissal following the sustaining of a demurrer, this court reviews the complaint de novo to determine whether it alleges facts stating a cause of action under any legal theory. . . . [¶] Because the function of a demurrer is not to test the truth or accuracy of the facts alleged in the complaint, we assume the truth of all properly pleaded factual allegations. [Citation.] Whether the plaintiff will be able to prove these allegations is not relevant; our focus is on the legal sufficiency of the complaint." (Los Altos Golf and Country Club v. County of Santa Clara ( 2008) 165 Cal.App.4th 198, 203; see also Ferrick v. Santa Clara University (2014) 231 Cal.App.4th 1337, 1341.) We do not, however, assume the truth of "mere contentions or assertions contradicted by judicially noticeable facts." (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20; see also Blatty v. New York Times Co. (1986) 42 Cal.3d 1033, 1040 ["when the allegations of the complaint contradict or are inconsistent with such facts, we accept the latter and reject the former"].) Nor do we assume the truth of "contentions, deductions or conclusions of law." (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) 2. Quiet Title
Because our review is de novo, it is unnecessary to address plaintiff's assertion that the superior court improperly based its ruling on factual statements drawn from the prior summary judgment proceeding, thus converting plaintiff's burden on demurrer into a defense to a summary judgment motion.
Plaintiff does not specifically challenge the demurrer ruling as it pertains to the cause of action for slander of title.
In order to state a viable claim for quiet title, plaintiff had to include in her pleading a description of the property, the basis of her alleged title, and the adverse claim against which she sought a judgment. (Code Civ.Proc. § 761.020.) Plaintiff's first amended complaint asserted no title, but only an equitable interest based on an oral promise from a third party, her father. On appeal, she contends that NCB's lien on Jacqueline's interest was "defective" because Jacqueline did not occupy the property and therefore had "no valid interest and cannot be a member" of the Twin Pines community.
Plaintiff first attacks NCB's status as a secured real estate creditor. In her view, its lien "is not a real property lien because stock cooperative developments do not involve ownership of any real property by their members; instead, it is the "co-op" that owns the land and improvements, while the members are only "occupants who own stock in the association."
The premise of this argument, that NCB's loan to Jacqueline was "not a secured real estate loan" but a loan "secured by personal property," is plainly incorrect. Both the former and current versions of Civil Code section 783.1 make it clear that separate interests in a stock cooperative "are interests in real property." Plaintiff's reference to 9 Miller & Starr, California Real Estate (3d Ed. 2000) section 25B:8, is incomplete and misleading; that source quotes Civil Code section 783.1 in explaining the same point. (See also 8 Cal. Real Est. §28:9 (4th Ed. 2015) [same].)
Plaintiff nonetheless insists that the loan cannot be a secured loan because "a lender takes security through the membership certificate and any Occupancy Agreement." Consequently, "it too is subject to the terms of the Bylaws and the [occupancy agreement]." Because Jacqueline did not occupy the property, she was not a valid member under the bylaws, and therefore NCB likewise did not have a security interest in the membership share. NCB, plaintiff argues, "takes no better lien as security than its borrower can give it." In a related argument, plaintiff contends that NCB cannot be a bona fide encumbrancer because it had "[c]onstructive [n]otice" of Jacqueline's defective membership. Had NCB or its title insurer made "reasonable inquiry" through inspection of either the unit or the Twin Pines records, it would have discovered that plaintiff, not Jacqueline, was occupying the property.
Neither of the asserted grounds for finding NCB to be a creditor with a defective security saves plaintiff's quiet title cause of action against NCB, because plaintiff herself had no superior title to that of Jacqueline. According to the complaint, Jacqueline received by "interspousal transfer deed" legal title to 99 percent of Richard's sole membership interest, which he had acquired after his joint tenant, Mary, died. Plaintiff concedes that she had only an equitable interest in the property, based on Richard's alleged promise after Mary's death to transfer Mary's interest to her. "[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." (Warren v. Merrill (2006) 143 Cal.App.4th 96, 113, fn. omitted; cf. G.R. Holcomb Estate Co. v. Burke (1935) 4 Cal.2d 289, 297 ["It has been repeatedly held in this state that an action to quiet title will not lie in favor of the holder of an equitable title as against the holder of a legal title"].)
Plaintiff attempts to refute NCB's reliance on collateral estoppel to confirm the court's prior summary judgment ruling that Mary's interest passed to Richard as her joint tenant. She does not, however, question the conclusion itself or cite contrary authority. We accept her implicit concession, therefore, that through joint tenancy Richard acquired the entire membership interest in the cooperative upon Mary's death, notwithstanding their prior divorce. (See Estate of Layton (1996) 44 Cal.App.4th 1337, 1342-1344 [because joint tenancy was not severed by couple's status-only dissolution judgment, property passed to ex-wife upon ex-husband's death and became part of her estate upon her death].)
Moreover, even if plaintiff could show that Jacqueline's legal title is defective, she cites no authority for the proposition that her "equitable rights . . . prevail if Jacqueline was unable to give valid security for this loan." "The plaintiff in a quiet title suit is not helped by the weakness of his adversary's title but must stand upon the strength of his or her own." (Shimpones v. Stickney (1934) 219 Cal. 637, 649; Helvey v. Sax (1951) 38 Cal.2d 21, 23 ["In a quiet title suit, the plaintiff may recover only upon the strength of his own title and not upon the weakness of defendant's title"].) Plaintiff's own interest, based on a vaguely stated oral promise, was insufficient, as any such promised transfer cannot be enforced without violating Code of Civil Procedure section 1971, the statute of frauds. Plaintiff's protest that the statute is inapplicable because "she has rendered performance thereunder [sic]" is unaccompanied by any explanation of how her continuing to live, as before, in the unit amounts to her "performance" that would entitle her to an interest superior to Jacqueline's legal title. (Cf. Anderson v. Stansbury (1952) 38 Cal.2d 707, 715 ["Before a party can be estopped to assert the statute due to the other's part performance, it must appear that a sufficient change of position has occurred so that the application of the statutory bar would result in an unjust and unconscionable loss, amounting in effect to a fraud"].)
Plaintiff did not allege that her equitable interest was based on fraudulent conduct by Richard. (Cf. Strong v. Strong (1943) 22 Cal.2d 540, 546 [without specific pleading of fraud, quiet title based on equitable interest insufficient]; Mazzera v. Wolf (1947) 30 Cal.2d 531, 535 "[T]he mere failure to perform an oral promise to convey real property is not itself fraud, and the agreement will be held unenforceable under the statute of frauds in the absence of actual or constructive fraud"].)
Even if she had been granted a cognizable real property interest by Richard, it is not conclusive against an "encumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded." (Civil Code section 1107.) "An encumbrancer in good faith and for value means a person who has taken or purchased a lien, or perhaps merely the means of obtaining one, and who has parted with something of value in consideration thereof. [Citation.] In addition, a 'good faith' encumbrancer is one who acts without knowledge or notice of competing liens on the subject property." (Brock v. First South Savings Assn. (1992) 8 Cal.App.4th 661, 667, italics omitted.)
Plaintiff cites no authority requiring NCB to investigate the property to determine whether Jacqueline actually occupied it before issuing the loan to her, rather than rely on Jacqueline's recorded transfer deed and recorded occupancy agreement. It is true that "a lender is not entitled to ignore information that comes to him from outside the recorded chain of title, to the extent such information puts him on notice of information that reasonably brings into question the state of title reflected in the recorded chain of title." (Triple A Management Co. v. Frisone (1999) 69 Cal.App.4th 520, 531.) On the other hand, "If an instrument cannot be located by searching the 'grantor' and 'grantee' indices of the public records, the instrument does not constitute constructive notice and later bona fide purchasers or encumbrances are not charged with knowledge of its existence." (Far West Savings & Loan Assn. v. McLaughlin (1988) 201 Cal.App.3d 67, 73.) Here there is no instrument, recorded or not, that would have suggested to NCB or its title insurer that a superior claim on the property existed. Nor are there any other facts set forth in plaintiff's first amended complaint giving rise to an inference that NCB had actual or constructive notice of plaintiff's competing claim. And even if NCB had inspected the unit, plaintiff's occupancy, without a recorded title or other verified right to possession, would not necessarily have appeared to be inconsistent with that of a family member seeking a loan secured by her recorded interest. (Cf. Houts v. First Trust & Sav. Bank (1917) 34 Cal.App. 613, 615 [foreclosure and subsequent eviction of plaintiff and her husband proper where private lease to them was not recorded, husband's business was apparent owner, and no other notice that would have triggered duty to investigate plaintiff's right to possession].) Whatever grievance plaintiff may have had against her father for reneging on his promise to give her half of his interest in the membership, and whatever defects plaintiff can show in Jacqueline's loan application, nothing in Jacqueline's application would have put NCB on notice that plaintiff had any rights in the property, thereby triggering a duty to inquire further.
Plaintiff has not suggested that by further amendment she could cure the defects in her pleading; indeed, there is no indication that she even wishes to undertake such amendment. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081; see also Rakestraw v. California Physicians' Service (2000) 81 Cal.App.4th 39, 44 [neither trial court nor appellate court will rewrite a complaint for the plaintiff].) Because her pleading fails as a matter of law to state a legally sufficient cause of action for quiet title and no amendment is proposed, we must uphold the ruling sustaining NCB's demurrer without leave to amend.
Disposition
The judgment is affirmed.
/s/_________
ELIA, J.
WE CONCUR: /s/_________
RUSHING, P. J.
/s/_________
WALSH, J.
Judge of the Santa Clara County Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.