Wang v. Lone Oak Fund CA2/4
B308656
| Cal. Ct. App. | Mar 29, 2022Background
- Plaintiffs Zhengjun and Baohua Wang allege they funded purchase of a Hacienda Heights property bought by Golden Ocean then titled to Baohua; later transfers and encumbrances occurred without their knowledge.
- In 2016 and 2017 powers of attorney (POAs) allegedly authorized third parties (Wong and Yang) to act for Baohua; respondents Lone Oak and Qualfax relied on those POAs to take deeds of trust on the Property.
- Qualfax initiated a nonjudicial foreclosure in January 2019 and purchased the Property at the sale.
- Lone Oak and Qualfax each moved for judgment on the pleadings, asserting they were good faith encumbrancers entitled to prevail as a matter of law; the trial court granted both motions and entered judgment for respondents without leave to amend.
- On appeal, the Wangs argued (a) defective service and lack of notice, (b) the POAs were forged so subsequent transfers were void, and (c) they should be allowed to amend to plead forgery and equitable relief.
- The Court of Appeal held the trial court did not err in granting judgment on the pleadings but found appellants showed a reasonable possibility they could amend to state claims; it reversed and remanded with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of service / notice of motions | Appellants: motions were not properly served (electronic service without consent; late notice) and they lacked actual notice | Respondents: service reached appellants’ counsel (Smith); no prejudice resulted from any procedural defect | Court: defective service alone insufficient to reverse because appellants failed to show prejudice; motions properly considered |
| Whether good-faith encumbrancer status may be decided on judgment on the pleadings | Appellants: status is factual and cannot be resolved on pleadings | Respondents: undisputed facts permit only one reasonable conclusion as to good-faith status | Court: such factual issues may be decided on judgment on the pleadings when undisputed facts admit only one reasonable inference |
| Whether respondents were good-faith encumbrancers (on the record) | Appellants: POAs were forged; recorded documents were suspicious (e.g., transfer labeled a gift; POAs reference unrelated property) | Respondents: contemporaneous POAs authorized the transfers; timing and documents did not give constructive or actual notice of fraud | Court: plaintiffs failed to show the record compelled a contrary result; trial court reasonably found respondents lacked notice and were good-faith encumbrancers |
| Leave to amend after dismissal | Appellants: can plead forgery of the POAs and thus void the subsequent deeds and allege equitable lien / injunctive relief | Respondents: plaintiffs forfeited amendment request and fail to show how amendment would cure defects | Court: plaintiffs may seek leave to amend on appeal and demonstrated a reasonable possibility of stating claims; remand with leave to amend granted |
Key Cases Cited
- Caito v. United California Bank, 20 Cal.3d 694 (good faith encumbrancer protected against undisclosed prior unrecorded claims)
- Reedy v. Bussell, 148 Cal.App.4th 1272 (prejudice required to reverse for defective notice of motion)
- Czajkowski v. Haskell & White, LLP, 208 Cal.App.4th 166 (motions on pleadings may decide factual issues when undisputed facts admit only one reasonable inference)
- Unruh-Haxton v. Regents of Univ. of California, 162 Cal.App.4th 343 (question of fact becomes question of law when facts are undisputed and inferences inevitable)
- Estate of Stephens, 28 Cal.4th 665 (actions by attorney-in-fact under invalid POA are void)
- Trout v. Taylor, 220 Cal. 652 (forged or void instruments cannot form basis for good title)
- Grappo v. Coventry Financial Corp., 235 Cal.App.3d 496 (equitable lien principles where justice or unjust enrichment so require)
- Reiner v. Danial, 211 Cal.App.3d 682 (bona fide purchaser/encumbrancer takes free of prior unrecorded claims unknown to purchaser)
- Ventura Coastal, LLC v. Occupational Safety & Health Appeals Bd., 58 Cal.App.5th 1 (leave to amend may be considered on appeal; plaintiff must show reasonable possibility of stating a cause of action)