Deutsche Bank Nat. Trust v. Pyle, D071079

Background

In 2005 Denise Saluto took a mortgage on Rancho Mirage property secured by a deed of trust (DOT); Saluto defaulted and Deutsche Bank bought the property at trustee's sale in July 2007 and recorded a trustee's deed.
Saluto (in propria persona) sued in 2009 seeking cancellation of the trustee's deed and DOT; the trial court entered a default judgment in December 2009 canceling the DOT and trustee's deed, which Saluto recorded in 2010.
Deutsche Bank (and successors) repeatedly moved to set aside the default judgment for lack of service; after multiple proceedings a 2013 order set aside the default judgment as void and that order was recorded.
Meanwhile Saluto recorded numerous unauthorized conveyances and sold the property (through entities she controlled) to Equalizer, which sold to Broadhurst and Pyle in 2012; they paid far less than Deutsche Bank had paid and took title with a new deed of trust recorded in 2013.
Deutsche Bank sued to quiet title, cancel instruments, and for related relief; defendants cross-claimed to quiet title. The trial court granted summary judgment for Deutsche Bank, concluding defendants were not bona fide purchasers because a void default judgment in the chain of title was nullified and Deutsche Bank’s recorded trustee’s deed remained effective. Judgment was affirmed on appeal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Effect of a void default judgment in the chain of title	Void judgment is a nullity; Deutsche Bank’s recorded trustee's deed remained in chain and prevails	A bona fide purchaser that relied on the recorded default judgment should take title free of the lien; quiet title protections apply	A void judgment does not pass title free of the lien; it nullifies subsequent transfers and does not confer quiet title protections because Saluto did not pursue a statutory quiet title action
Whether defendants are bona fide purchasers	Deutsche Bank: defendants had record/inquiry notice of Deutsche Bank’s trustee’s deed and suspicious chain transfers; thus not BFPs	Defendants: paid value in good faith and lacked notice; relied on the recorded default judgment and title insurer	Defendants are not bona fide purchasers as a matter of law (record/inquiry notice and suspicious facts foreclose BFP status)
Applicability of quiet title statutes (e.g., § 764.060) to the default judgment	Deutsche Bank: statutes protect judgment purchasers only in formal quiet title actions; Saluto’s judgment was not a quiet title judgment so § 764.060 does not apply	Defendants: the default judgment effectively granted quiet title and therefore statutory protection should apply	Court: Quiet title statutory protections do not apply because Saluto did not plead or obtain a statutory quiet title judgment and the default prove‑up did not meet the statutory procedural safeguards
Equitable considerations and remedies for defendants	Defendants: equities favor them as innocent purchasers who relied on recorded judgment and title insurer	Deutsche Bank: equities favor it—paid full trustee sale price, lacked knowledge of Saluto’s fraud, defendants paid far less and had red flags; title insurer remedy exists	Court: equities favor Deutsche Bank; defendants’ remedy is against their title insurer; judgment for Deutsche Bank affirmed

Key Cases Cited

OC Interior Services, LLC v. Nationstar Mortgage, LLC, 7 Cal.App.5th 1318 (Cal. Ct. App.) (a void judgment in the chain of title does not pass title free of the lien and nullifies subsequent transfers)
Garrison v. Blanchard, 127 Cal.App. 616 (Cal. Ct. App.) (discussed regarding effects of vacated default/quiet title judgments on purchasers)
Newport v. Hatton, 195 Cal. 132 (Cal. 1925) (authority on purchaser protection and judgments affecting title)
Marlenee v. Brown, 21 Cal.2d 668 (Cal. 1943) (addressing title effects of judgments and purchaser rights)
Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal.App.4th 808 (Cal. Ct. App.) (describing cancellation of instruments and required showing)