Opinion
G060933
04-07-2022
ELIZABETH S. YOUNG, Plaintiff, Cross-defendant and Respondent, v. LUXURY ESTATES GROUP, LLC, Defendant, Cross-complainant and Appellant.
Adleson, Hess & Kelley, Jeffrey A. Baruh and Matthew Y. Minae for Defendant, Cross-complainant and Appellant. Morse, Morse & Morse and Brian D. Morse; McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for Plaintiff, Cross-defendant and Respondent.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Santa Cruz County, No. 17CV00713 Samuel S. Stevens, Judge. (Retired judge of the Santa Cruz Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed.
Adleson, Hess & Kelley, Jeffrey A. Baruh and Matthew Y. Minae for Defendant, Cross-complainant and Appellant.
Morse, Morse & Morse and Brian D. Morse; McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for Plaintiff, Cross-defendant and Respondent.
OPINION
SANCHEZ, J.
INTRODUCTION
There is an old saying that comes to mind in reviewing the present case: "Never buy a pig in a poke." This saying refers to something that is bought without being first inspected and thus is of unknown authenticity or quality.
San Francisco real estate investor Luke Stickney decided to roll the dice one day in July 2017 and purchase a 40-acre parcel, sight unseen, from an eBay auction site for $25,000. He was told by the seller, who heretofore had been unknown to him, that the sale had to close immediately, and there was no time to pull a title report. Within one week of the bid, Stickney's company, appellant Luxury Estates Group (LEG), received a deed to a property he knew nothing about.
As these stories so often go, things did not go smoothly for Stickney from there, as he soon found himself on the receiving end of a lawsuit from the respondent, Elizabeth Young. It turns out the seller from whom Stickney had purchased the parcel did not actually own it. And after a bench trial, the trial court quieted Young's title as against LEG. Finding no reversible error, we affirm.
FACTS
LEG is a limited liability company formed in 2015 by Stickney. It was intended to be a holding company for vacation rentals. While perusing eBay one day in mid-July 2017, Stickney saw that a 40-acre parcel of land located in Santa Cruz County was being auctioned. He bid $25,000, but that was not the highest bid. Soon after, he received a chat message from a man named Daniel Dove. Dove explained that the highest bidder was unable to go through with the purchase and Stickney was the second-highest bidder. He asked if Stickney was still interested in the property, and Stickney responded in the affirmative.
The two men began communicating, and over the next few days, Stickney learned from Dove that he had acquired the property in an exchange from a man named Donald Blaha, who owed him money. As proof of ownership of the property, Dove sent Stickney a copy of a recorded grant deed from Blaha to himself. Stickney noticed the deed stated no documentary transfer tax was being paid, and he surmised this justified the relatively small sum he was being asked to pay for such a large property.
Dove also e-mailed to Stickney a copy of a preliminary title report for the property. In it, Stickney could see that Blaha had jointly owned the property with two other joint tenants, Young and Blaha's mother, Janette Blaha-Huls. He could also see that the chain of title contained no deed conveyance from Young and Blaha-Huls of their interests in the property to Blaha. However, he noticed there was a reconveyance of mortgage recorded in May 2012 to Blaha only. He assumed this meant Young and Blaha-Huls had only gotten on title to secure the mortgage, and once it was repaid, they were taken off. Based on this assumption, Stickney never commissioned a title report himself and did no further checking to confirm Young and Blaha-Huls had conveyed their interests in the property to Blaha. What he claimed he did do was speak to a friend of his named "Rita" who worked at a title company. She recommended he get title insurance and told him a title company would go back in the record chain about two years. If they saw no lis pendens or other liens, they would typically stop there and issue a policy. Rita never testified at trial.
The problem was time. Dove told Stickney he was a ship captain and was shipping out soon. He needed the money from the sale to be able to send to a sick relative. Pulling a title report through a title company would take 30 to 45 days, and Dove said he just could not wait that long. Stickney sent Rita the report Dove had given him. Rita told him she could see no liens or lis pendens in the chain of title, so Stickney thought this meant title was free of defects. He decided to go through with the sale, and received a deed from Dove, which was recorded on July 17, 2017.
Stickney's understanding throughout was that LEG had purchased a 100 percent interest in the property. But little did he realize that only four months earlier, in March 2017, Young had filed a complaint to quiet title to the very same property against Dove. She had neglected at the time to file a lis pendens, as is statutorily required in quiet title actions. Instead, she waited until two days after LEG recorded its deed to record the lis pendens. By December 2017, Young had amended her complaint to add LEG as a defendant.
We only have the first amended complaint in our record, not the original complaint.
Through this lawsuit Stickney learned Dove had essentially committed fraud. In her verified first amended complaint, Young alleged that, in the course of efforts Blaha undertook to sell his interest in the property, he had been connected with Dove, who offered to purchase it. Blaha and Dove had entered into an agreement whereby Dove was to pay $350,000 in installments for Blaha's one-third interest in the property. Once the installments were paid in full, the interest would be conveyed. However, Dove asked Blaha to give him a deed, which he agreed to keep and not record until the full purchase price was paid.
Blaha and Dove created a rudimentary document to memorialize their agreement, and they both signed it on May 7, 2014. But in contravention of his promise, and unbeknownst to Blaha, Dove went ahead and recorded the deed on May 9, 2014, before he had even paid a dime. This was the deed Dove had sent to Stickney. In her pleading, Young alleged that sometime between May and November 2014, Blaha backed out of his agreement with Dove. He told Dove he had conferred with his cotenants and now no longer thought going through with the sale was a good idea. Without advising Blaha that he had already recorded the deed, Dove agreed to rescind the transaction. He then moved away from the area. No one was seemingly aware that Dove's sham deed was in the public record until sometime in 2015.
Young's first amended complaint alleged the following causes of action: (1) quiet title against Dove, Blaha, Blaha-Huls, and LEG, (2) fraud and misrepresentation against Dove, (3) cancelation of grant deeds against Dove (4) constructive trust against Dove, and (5) declaratory relief against all defendants. Young alleged Blaha had assigned her all of his rights and claims against Dove.
After a bench trial, the trial court quieted title in favor of Young, Blaha, and Blaha-Huls as joint tenants as against Dove and LEG, and also canceled the Blaha-Dove and Dove-LEG deeds, declaring them void. The court found LEG was not a bona fide purchaser for value because it had actual or constructive notice of Young's interest.
DISCUSSION
LEG's arguments on appeal are numerous, some of them having to do with procedural issues at trial, and others having to do with estoppel defenses. But ultimately there is one central question which either makes or breaks LEG's appeal of the judgment. Is LEG a bona fide purchaser? We resolve this question against LEG, and thus need not address at any length the secondary issues.
Young raises a threshold problem in her responding brief. Young's verified first amended complaint sought, amongst other things, the cancelation of the deed from Blaha to Dove fraudulently recorded in May 2014. The trial court awarded her this relief in the amended judgment. Young argues that LEG failed to challenge this specific form of relief on appeal, and thus, it has forfeited any appeal of that relief. LEG responds that its notice of appeal encompasses the entirety of the judgment, including all forms of relief contained therein, and that a reversal of the judgment based on its arguments would necessarily extend to the trial court's cancelation of any deeds. We tend to agree more with LEG on this issue, though we take issue somewhat with its framing.
It is true that LEG's notice of appeal references the entirety of the judgment. However, it is incorrect for LEG to simply assume that its appeal of the entire judgment encompasses the Blaha-Dove deed. "It is a fundamental rule of appellate review that the judgment appealed from is presumed correct and '"'all intendments and presumptions are indulged in favor of its correctness.'" [Citation.]' [Citation.] An appellant must provide an argument and legal authority to support his contentions. This burden requires more than a mere assertion that the judgment is wrong. 'Issues do not have a life of their own: If they are not raised or supported by argument or citation to authority, [they are] . . . waived.' [Citation.] It is not our place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness. When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived." (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852.)
Though LEG seeks to reverse the judgment of quiet title against it, it makes no argument which would require reversal of the trial court's judgment regarding the Blaha-Dove deed. In fact, we presume it agrees the Blaha-Dove deed was a fraudulent one; it has no reason to say otherwise. It was a complete stranger to the Dove-Blaha transaction. And indeed, it appears LEG itself was a victim of further fraud by Dove. So even if we were to find LEG a bona fide purchaser and/or that Young is estopped from asserting her title against LEG, such findings would have zero impact on the Blaha-Dove deed. Neither side disputes the Blaha-Dove deed was fraudulent and voidable. It has now been canceled, and we cannot see how LEG's appeal would operate to resurrect it.
Yet even if the Blaha-Dove deed has now disappeared from the chain of title, it would not necessarily detract from LEG's adverse claim to the property. As a deed procured through fraud, the Blaha-Dove deed was voidable, rather than void ab initio, and could still convey good title to a subsequent good faith purchaser. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106.) "[I]t is well established that a subsequent good faith purchaser for value and without notice of the fraud or imposition is not chargeable with the fraud or imposition of his predecessor and takes title free of any equity of the person thus defrauded or imposed upon." (Strutt v. Ontario Savings & Loan Assn. (1970) 11 Cal.App.3d 547, 554.)
But LEG must be a good faith purchaser for this principle to hold. And this is where LEG runs into problems. Substantial evidence supports the trial court's finding that LEG was not a bona fide purchaser of the property. (Hochstein v. Romero (1990) 219 Cal.App.3d 447, 451 [trial court's ruling as to bona fide purchaser status must be affirmed on appeal if supported by substantial evidence].)
"Every person who has actual notice of circumstances sufficient to put a prudent person upon inquiry as to a particular fact has constructive notice of the fact itself in all cases in which, by prosecuting such inquiry, he or she might have learned that fact." (Civ. Code, § 19.) And by law, a recorded deed conveys constructive notice on all subsequent purchasers of the titleholder's interest. (See Civ. Code, § 1213.) It was undisputed at trial that Young's prior interest in the property was recorded, and Stickney admitted that he was aware of it before he consummated the purchase with Dove. Young's prior recorded interest thus has priority over LEG's later recorded interest, and LEG took its title with notice of that interest. It cannot be a bona fide purchaser in such a case. (See Davis v. Ward (1895) 109 Cal. 186, 189-190.) As a result, Young rightly prevailed over LEG on her quiet title claim.
LEG claims Young should have been estopped from being able to quiet title against it because she failed to record notice of lis pendens at the time she filed her complaint, which is a requirement for quiet title actions under Code of Civil Procedure section 761.010. It argues Young's failure to do so was prejudicial. Had she timely filed notice of lis pendens-so the argument goes-the lis pendens would have appeared on any reports reviewed by Stickney or his title company contacts prior to purchasing the property. This argument is not entirely without merit. Had Young promptly complied with the statutory requirement, we can speculate what might have happened, and LEG might never even have been a party to this case at all. But speculation is just that. Again, the record shows that Young's and Blaha-Huls's interest was clearly reflected in the chain of title, and Stickney admits he knew it was an issue. LEG had notice of Young's interest prior to the purchase and so there was no prejudice from her failure to comply with the statute. Further, Young's failure to file the notice of lis pendens does not deprive the court of jurisdiction to decide the quiet title action. (Leaf v. Superior Court (1936) 12 Cal.App.2d 712, 716.)
LEG also contends the trial court failed to consider its judicial estoppel defense. LEG believes Young was improperly permitted to assert Blaha's claim to title, because Blaha had omitted this claimed interest in his bankruptcy filings. According to LEG, Blaha was therefore judicially estopped from being able to quiet title.
It is true that the trial court did not address the judicial estoppel issue in its findings or statement of decision. But LEG did not bring this defect to the trial court's attention. "[A] party claiming deficiencies [in a statement of decision] must bring such defects to the trial court's attention to avoid implied findings on appeal favorable to the judgment." (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1134.) Here, LEG admits it failed to file objections to the statement of decision to bring the omission of the judicial estoppel argument to the trial court's attention. Nevertheless, LEG contends the coronavirus pandemic and ensuing shutdowns caused the filing of objections to be overlooked. It argues it addressed the argument in its closing briefs and requested a ruling on the issue in the statement of decision, but the trial court simply ignored it. Still, the failure to point out the deficiency in the statement of decision means we must imply the trial court did not think judicial estoppel barred Blaha's claim to title.
Finally, LEG contends there was a huge sea change in the case when Blaha testified at trial.
For one thing, he testified he had orally transferred his interest to Young in 2014. It had been LEG's understanding all along that Blaha had claimed continuous ownership of his interest through the date of filing the complaint. When Blaha gave this testimony, LEG's counsel felt he had been thrown a curveball. He sought a continuance in order to decide how to handle it. The trial court declined, noting it made no difference to the outcome. We tend to agree. Young is and always has been the plaintiff in the case, and as such, it is her title that matters, not Blaha's. In any event, LEG's failure to meet the criteria for bona fide purchaser status means it has no standing to contest whether Blaha should be on title or not. Young has standing to assert her own title against LEG.
The second wrinkle to come out at trial was when Blaha testified he had never told Blaha-Huls or Young about his deal with Dove. He also stated he had never asked for their permission to enter into the purchase agreement with Dove. Rather, Young found out about it sometime in mid-2015 when she noticed Dove's name on property tax bills, which it was her responsibility to pay. LEG claims this state of affairs undercuts Young's initial complaint, which alleged that Blaha had canceled the transaction with Dove after speaking to her and his mother. We do not see the contradiction. The pleading, filed in 2017, stated Blaha had told Dove - not Young or Blaha-Huls - that he had spoken with his cotenants. This does not mean he actually had.
In sum, we see no reversible error in the trial court's judgment.
DISPOSITION
The judgment is affirmed. Young shall recover her costs on appeal.
WE CONCUR: MOORE, ACTING P. J., GOETHALS, J.