Deutsche Bank Nat'l Trust Co. v. Pyle
13 Cal. App. 5th 513
| Cal. Ct. App. 5th | 2017Background
- Denise Saluto obtained a 2005 loan secured by a deed of trust; after default Deutsche Bank purchased the property at a 2007 trustee's sale and recorded a trustee's deed.
- Saluto, acting in propria persona, sued in 2009 to cancel the trustee's deed and deed of trust; the trial court entered a default judgment in her favor in December 2009 cancelling the trustee's deed and enjoining Deutsche Bank.
- Deutsche Bank repeatedly moved to set aside that default judgment; after prolonged proceedings a trial court in 2013 granted Deutsche Bank’s motion, finding the default judgment void for lack of service, and recorded the order setting it aside.
- Meanwhile Saluto recorded multiple unauthorized transfers and, through entities she controlled, conveyed the property to Equalizer, which sold the property in 2012 to Broadhurst and Pyle, who obtained title insurance and financed the purchase with FirstBank.
- Deutsche Bank sued for quiet title, cancellation of instruments, declaratory and injunctive relief, and slander of title; defendants cross-claimed to quiet title. The trial court granted Deutsche Bank summary judgment, concluding defendants were not bona fide purchasers because the void default judgment did not eliminate Deutsche Bank’s recorded trustee’s deed.
Issues
| Issue | Plaintiff's Argument (Deutsche Bank) | Defendant's Argument (Broadhurst/Pyle/FirstBank) | Held |
|---|---|---|---|
| Effect of a void default judgment in the chain of title | Void judgment is a nullity and cannot extinguish Deutsche Bank's recorded interest; subsequent purchasers had record notice | A purchaser relying on a default judgment that appears valid takes free of prior liens; quiet-title protections (e.g., §764.060) should protect them | A void judgment is a nullity; it does not pass title free of the lien and nullifies subsequent transfers—defendants are not bona fide purchasers as a matter of law |
| Applicability of quiet-title statutory protections to a non-quiet-title default judgment | Quiet-title protections do not apply because Saluto did not plead quiet title; she sought cancellation of instruments and rescission under TILA | Defendants claim protections of quiet-title scheme apply where purchaser relied on a recorded judgment | Quiet-title statutes (and §764.060) do not apply to non-quiet-title default judgments; protection is limited to judgments entered in proper quiet-title proceedings |
| Bona fide purchaser status (value, good faith, notice) | Deutsche Bank argues defendants had record/inquiry notice (trustee's deed and multiple suspicious transfers) and cannot claim bona fide status | Defendants contend they purchased for value and relied on the recorded default judgment without knowledge of defects | Defendants lacked bona fide purchaser protection because the trustee’s deed remained of record and circumstances put them on inquiry notice |
| Remedy for defendants / equities | Deutsche Bank urges enforcement of its recorded interest and equitable relief in its favor | Defendants emphasize loss and reliance on title insurance; seek to retain title or be protected | Equities favor Deutsche Bank: it paid higher price at trustee’s sale, had no knowledge of Saluto’s fraud; defendants’ remedies lie with their title insurer |
Key Cases Cited
- OC Interior Services, LLC v. Nationstar Mortgage, LLC, 7 Cal.App.5th 1318 (Cal. Ct. App.) (void judgment in chain of title nullifies subsequent transfers; does not pass title free of lien)
- Garrison v. Blanchard, 127 Cal.App. 616 (Cal. App. 1932) (discussed re: effect of vacated default/quiet title judgments on subsequent purchasers)
- Newport v. Hatton, 195 Cal. 132 (Cal. 1924) (older authority on purchaser protection where judgment appears valid)
- Marlenee v. Brown, 21 Cal.2d 668 (Cal. 1943) (quiet-title precedent on effect of judgments)