OC Interior Services, LLC v. Nationstar Mortgage, LLC
7 Cal. App. 5th 1318
| Cal. Ct. App. | 2017Background
- In 2007 Hart obtained a $2M loan secured by a recorded first deed of trust (First DOT); the loan was later held in a trust with Deutsche Bank as trustee and serviced (later) by Aurora, then Nationstar.
- Hart sued Mirad (the original lender) in propria persona in 2009 to cancel the First DOT and obtained a default judgment after Mirad did not respond; the judgment purported to cancel the First DOT and was recorded.
- OCI purchased the property days after the recorded default judgment, obtained title insurance, and paid substantially less than the home’s purported value; the title documents did not reference the First DOT.
- Mirad later moved in the Hart action to set aside the default judgment for lack of service; the trial court granted the motion and vacated the default judgment as void. MERS intervened then withdrew.
- OCI sued to enjoin a trustee's sale and sought a declaratory judgment that it took title free of the First DOT as a bona fide purchaser; trial court granted summary adjudication for OCI. Appellants appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OCI, as a bona fide purchaser relying on a recorded default judgment that cancelled the First DOT, took title free of the First DOT | OCI: The recorded default judgment showed the First DOT was cancelled; OCI relied on the record and title insurance and therefore took free title | Appellants: The default judgment was void (lack of service) and a void judgment is a nullity that cannot convey title even to a bona fide purchaser | Court: A judgment later adjudicated void is a nullity; OCI, even if a bona fide purchaser, took title subject to the First DOT |
| Legal effect of a judgment void for lack of jurisdiction in the chain of title | OCI: Distinguishes judgments “void on their face” vs. those appearing valid; argues the recorded judgment could be relied on by a purchaser | Appellants: Void judgment (even if appearing valid) cannot transfer good title; distinction of facial validity does not save it once adjudicated void | Court: Whether void on its face or shown void by extrinsic evidence, a judgment lacking jurisdiction is a nullity for all purposes and cannot transfer good title |
| Applicability of exceptions protecting bona fide purchasers from collateral attacks on prior judgments | OCI: Relies on authorities allowing purchasers to retain title when prior judgments appear valid on their face | Appellants: Those cases are distinguishable; a void judgment cannot be the basis for superior title | Court: Exception for bona fide purchasers does not protect a purchaser from a previously adjudicated void judgment that purported to transfer title |
| Whether triable issues exist on OCI’s bona fide purchaser status | OCI: Argued as matter of law it qualified as a bona fide purchaser | Appellants: Disputed OCI’s good faith/no notice; factual issues exist | Court: Assumed (without deciding) OCI might be bona fide purchaser but held that even so, void judgment defeats free title |
Key Cases Cited
- Morgan v. City of Los Angeles, 105 Cal.App.2d 726 (Cal. Ct. App.) (void judgment is a nullity and cannot bind parties)
- Garrison v. Blanchard, 127 Cal.App. 616 (Cal. Ct. App.) (limits on collateral attack and effect on bona fide purchasers in related quiet-title contexts)
- Gray v. Hawes, 8 Cal. 562 (Cal. 1857) (void judgment cannot convey good title to subsequent purchasers)
- Marlenee v. Brown, 21 Cal.2d 668 (Cal. 1943) (exception to collateral-attack rule where bona fide purchaser status may bar relief)
- Andrews v. Superior Court of San Joaquin County, 29 Cal.2d 208 (Cal. 1946) (a void judgment may be attacked anywhere and is a nullity)