Case Information
*1 Filed 4/1/21
CERTIFIED FOR PARTIAL PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
TSASU LLC, B298589 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. BC686325) v.
U.S. BANK TRUST, N.A., as
Trustee, etc.,
Defendant and
Respondent. APPEAL from a judgment of the Superior Court of Los Angeles County, Susan Bryant-Deason, Judge. Affirmed.
Garrett & Tully, Ryan C. Squire, Motunrayo D. Akinmurele and Linda R. Echegaray for Plaintiff and Appellant.
Perkins Coie, David T. Biderman and Ofunne N. Edoziem for Defendant and Respondent.
* * * * * *
Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion is certified for publication with the exception of part II of the Discussion.
Under California’s Quiet Title Act (Code Civ. Proc., § 760.010 et seq.) [1] (the Act), a third party who “a ct[s] in reliance on” a quiet title judgment retains its property rights— even if that quiet title judgment is subsequently invalidated as void — as long as the third party qualifies as a “purchaser or encumbrancer for value . . . without knowledge of any defects or irregularities in [the earlier quiet title] judgment or the proceedings.” (§ 764.060.) For these purposes, does “knowledge” mean only actual knowledge or, instead, both actual and constructive knowledge? We hold that it is the latter, such that the Act insulates a third party from the effect of a subsequent invalidation of an earlier quiet title judgment only if the third party has no actual or constructive knowledge of any defects or irregularities in that judgment. Because the recorded chain of title in this case revealed that the earlier quiet title judgment had been prosecuted and obtained against a party that no longer held interest in a deed of trust and because the third party whose lien priority rested on that judgment actually knew of facts warranting further inquiry into the validity of the judgment, that third party had constructive knowledge of a defect or irregularity in the judgment. As a result, the trial court properly granted summary judgment against the third party in its current quiet title lawsuit to assert lien priority.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
This action deals with a parcel of property located at 9800 South 5th Avenue in Inglewood, California (the property). All further statutory references are to the Code of Civil 1 Procedure unless otherwise indicated.
A. CIT Group Deed of Trust 1. Creation
In February 2007, Cassandra Celestine (Celestine) borrowed $448,000 from CIT Group/Consumer Financing (CIT Group); CIT Group secured its loan with a deed of trust in the property that was recorded on February 28, 2007 (CIT Deed of Trust).
Celestine paid the first three monthly payments on the loan, and then stopped making payments.
2. Subsequent assignments In early September 2012, CIT Group assigned the CIT Deed of Trust to U.S. Bank, N.A. as trustee on behalf of SASCO Mortgage Loan Trust 2007-RNP1 (SASCO). [2] The assignment was recorded on September 26, 2012.
In early June 2014, SASCO assigned the CIT Deed of Trust to DLJ Mortgage Capital, Inc. (DLJ Mortgage). The assignment was recorded on June 13, 2014.
3. Initiation of foreclosure proceedings On July 3, 2014, which was less than a month after the assignment to DLJ Mortgage, DLJ Mortgage recorded — and mailed to Celestine — a notice of default setting forth the outstanding balance Celestine owed to DLJ Mortgage and giving her 90 days to pay.
4. Ce lestine’s quiet title action to set aside and
expunge the CIT Deed of Trust
Before the 90-day deadline expired, Celestine on September 11, 2014, filed a lawsuit (the Celestine Action). Proceeding as a Prior to this assignment, a false grant deed was recorded 2 that purported to convey the CIT Deed of Trust back to Celestine. Celestine later agreed to set aside the false grant deed. *4 self-represented litigant, Celestine alleged 12 claims, including a claim under the Act to invalidate the CIT Deed of Trust. She filed a notice of lis pendens regarding her lawsuit on September 23, 2014.
Although SASCO and DLJ Mortgage had recorded their assignment of the CIT Deed of Trust and although Celestine had exchanged letters with the loan servicers reaffirming that SASCO and then DLJ Mortgage had acquired the CIT Deed of Trust from CIT Group, Celestine did not name SASCO or DLJ Mortgage as defendants. Instead, she named only (1) CIT Group, and ( 2) “All Persons Known & Unknown Claiming Any Legal Or Equitable Right, Title, Estate, Lien, or Interest In The Property Described In The Complaint Adverse To Plaintiff Title Or Any Cloud On Plaintiff Title Thereto.” What is more, Celestine did not properly serve CIT Group with the complaint.
As a result, no one with an interest in the property was ever served with Celestine’s complaint and, consequently, no one ever appeared.
On October 29, 2014, Celestine obtained a default. On May 28, 2015, the trial court entered a default judgment quieting title to the property against CIT Group and permanently enjoining CIT Group and its “successors in interest” from “[a]sserting . . . any interest or ownership” in the property, including through the CIT Deed of Trust (2015 Quiet Title Judgment). The 2015 Quiet Title Judgment was recorded on July 22, 2016.
On August 4, 2016, the trial court issued an order expunging the CIT Deed of Trust and declaring it to be “ Reversed, Cancelled, Set Aside and made Null and Void, Ab *5 I nitio, for all purposes” (201 6 Expungement Order). The 2016 Expungement order was recorded on August 10, 2016.
5. Transfer of loan and assignment of CIT Deed of
Trust to U.S. Bank
On April 14, 2016, DLJ Mortgage had transferred the loan underlying the CIT Deed of Trust to U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust (U.S. Bank).
On August 3, 2016, DLJ Mortgage assigned the CIT Deed of Trust to U.S. Bank. The assignment was recorded on August 11, 2016.
6. Proceedings to set aside and expunge the 2015
Quiet Title Judgment
On December 20, 2016, Caliber Home Loans, Inc. (Caliber) specially appeared in the Celestine Action and filed a motion to set aside the default and the 2015 Quiet Title Judgment against CIT Group on the ground that CIT Group had never received notice of the lawsuit. Caliber is the successor in interest to CIT Group.
On May 8 , 2017, the trial court granted Caliber’s motion and set aside the 2015 Quiet Title Judgment, and on July 10, 2017, Caliber recorded the order setting aside the judgment.
On July 24, 2017, the trial court granted Caliber’s further motion to expunge the 2015 Quiet Title Judgment and the 2016 Expungement Order from the record of title.
7. Dismissal of Celestine Action On August 17, 2017, the trial court dismissed the Celestine Action for lack of prosecution.
B. Tsasu Deed of Trust
On September 2, 2016, Celestine borrowed $285,000 from Tsasu, LLC (Tsasu); Tsasu secured its loan with a deed of trust *6 against the property that was recorded on September 15, 2016 (Tsasu Deed of Trust).
At the time the Tsasu Deed of Trust was recorded, the recorded documents in the record of title for the property included (1) the 2015 Quiet Title Judgment against CIT Group that invalidated the CIT Deed of Trust, and (2) the 2012 and 2014 assignments of the CIT Deed of Trust reflecting that the CIT Group had not owned the CIT Deed of Trust since 2012. In deciding whether to loan Celestine money, Tsasu’s CEO relied upon a preliminary report prepared by a title insurance company, and that report was based upon “the results of the title search” obtained by that company. The title search results accurately reflected the above described recorded documents — namely, a “Judgment, Quiet Title” on July 10, 2015 against “The CIT Group” as well as two “Deed of Trust/Assignment[s]” (one to SASCO in 2012, and another to DLJ Mortgage in 2014).
Celestine also stopped making payments to Tsasu.
II. Procedural Background
In December 2017, Tsasu sued U.S. Bank. [3] In the operative first amended complaint, Tsasu alleges two claims for declaratory relief and one for quiet title. Through these claims, Tsasu seeks (1) a quiet title and declaratory judgment that the Tsasu Deed of Trust has priority over the CIT Deed of Trust because the orders setting aside and expunging the 2015 Quiet Tsasu also named Quality Loan Service Corporation 3 (Quality), which was the foreclosure trustee at the time Celestine had filed the Celestine Action. However, Quality filed a declaration of nonmonetary status, agreeing to be bound by any judgment for nonmonetary relief. Quality is accordingly no longer an active party in this case.
Title Judgment are ineffective as to Tsasu and (2) a declaratory judgment that (a) Tsasu was denied due process because it was not given timely notice of, or asked to join in, the proceedings to set aside and expunge the 2015 Quiet Title Judgment, (b) enforcing the orders setting aside and expunging the 2015 Quiet Title Judgment against Tsasu would run afoul of the “equitable doctrine of unclean hands” and the maxim in Civil Code section 3543 (because Tsasu was less negligent than U.S. Bank).
The parties filed cross-motions for summary judgment or, in the alternative, summary adjudication. [4]
Following a hearing in late February 2019, the trial court in April 2019 issued a 16-page order granting summary judgment for U.S. Bank, declaring U.S. Bank’s motion for summary adjudication to be moot, and denying Tsasu’s cross -motion.
Tsasu filed a motion for a new trial after the trial court entered its judgment of dismissal. The trial court denied the motion on June 17, 2019.
Tsasu filed this timely appeal.
DISCUSSION
Tsasu argues that the trial court erred in granting summary judgment for U.S. Bank, and goes on to request the logically inconsistent remedies of a remand for trial of disputed factual issues and the entry of summary judgment in its favor. Tsasu also challenges the trial court’s denial of its new trial motion, but did not raise this challenge in its opening brief on To preserve its jurisdiction to resolve the lawsuit, the trial 4 court granted a preliminary injunction prohibiting U.S. Bank from foreclosing on the CIT Deed of Trust pending suit. The injunction was dissolved once the trial court entered judgment for U.S. Bank, and the property was subsequently sold.
appeal and devoted only one paragraph to it in its reply brief;
Tsasu’s decision not to present reasoned argument in support of
its challenge to the new trial motion in its opening or reply briefs
on appeal constitutes a waiver of that challenge. (
Cahill v. San
Diego Gas & Electric Co.
(2011)
Summary judgment is appropriate, and the moving party
(here, the defendant) is entitled to judgment as a matter of law,
where (1) the defendant carries its initial burden of showing the
nonexistence of one or more elements of the plaintiff’s claim(s),
and (2) th e plaintiff thereafter fails to show the “existence of a
triable issue of material fact” as to those elements. (
Aguilar v.
Atlantic Richfield Co.
(2001)
Whether Tsasu is entitled to the quiet title and declaratory
judgments it seeks in its operative complaint turns entirely on
what effect, if any, the trial court’s order s setting aside and
expunging the 2015 Quiet Title Judgment have on Tsasu’s Deed
of Trust, which was recorded
after
the 2015 Quiet Title Judgment
was recorded but
before
it was set aside as void. As a general
*9
rule, whichever deed of trust is recorded first in time is entitled
to priority (Civ. Code, § 1214; see
Thaler v. Household Finance
Corp.
(2000)
I. The Quiet Title Act
Enacted in 1980, the Act creates a special procedural
mechanism for seeking and obtaining in rem judgments resolving
adverse claims to property that would be binding even to
nonparties and hence be “good against all the world.” (
Nickell v.
Matlock
(2012)
The requirements for obtaining a quiet title judgment
under the Act are more stringent than the requirements for
obtaining judgments resolving adverse claims to property under
other causes of action. (Cf.
Deutsche Bank National Trust Co. v.
Pyle
(2017)
If the plaintiff in the quiet title action satisfies the Act’s
more stringent requirements, the resulting quiet title judgment
is more resilient to subsequent challenges to the interest litigated
in that action. However, the extent of this resilience varies. As
to a person who had a “claim to the property” at the point in time
at which quiet title was determined and who was “a part[y] to the
[quiet title] action,” a quiet title judgment under the Act is
“binding and conclusive.” (§ 764.030, subd. (a); see also § 761.020, subd. (d ) [quiet title action must articulate “[t]he date
as of which the determination [of title] is sought ” ].) As to a
person who had a “claim to the property” at the point in time at
which quiet title was determined and who was
not
a “part[y] to
the action,” a quiet title judgment under the Act is “binding and
conclusive” unless, “at the time the lis pendens was filed or, if
none was filed, at the time the [quiet title] judgment was
recorded,” (1) the nonparty’s claim was “of record” (§§ 764.030,
subd. (b), 764.045, subd. (a)), or (2) the nonparty’s claim “was
actually known to the plaintiff or would have been reasonably
apparent from an inspection of the pro perty” (§ 7 64.045, subd.
(b)). And as to a person who “reli[ed] on the [quiet title]
judgment” when subsequently acquiring a claim to the property,
a quiet title judgment under the Act remains valid pursuant to
section 764.060 — even if that judgment is later invalidated
through “direct [] or collateral[] attack[]”— as long as that person
was a “purchaser or encumbrancer for value . . . without
knowledge of any defects or irregularities in the [quiet title]
judgment or the proceedings.” (§ 764.060.) The Act’ s treatment
of persons falling into the last category marks a departure from
prior law, which held that a court order invalidating an earlier
judgment resolving a claim to property also invalidated all
*12
subsequent property claims made in reliance on that judgment
unless (1) the judgment was “valid on [its] face” (that is, the
defect with the judgment could not be determined “‘ only by a
consideration of the matters constituting part of the judgment
roll ’”) (
OC Interior Services, LLC v. Nationstar Mortgage, LLC
(2017)
Because Tsasu acquired its claim to the property during the interregnum period between the recording of the 2015 Quiet Title Judgment under the Act and the set aside and expungement of that judgment in 2017, the priority position of the Tsasu Deed of Trust under the Act turns on whether Tsasu falls within the ambit of section 764.060.
A. Interpreting section 764.060 As noted above, section 764.060 insulates the lien priority of a person who has “act[ed] in reliance” on a quiet title “judgment” from the effects of a subsequent invalidation of that judgment if that person was a “purchaser or encumbrancer for value of the property . . . without knowledge of any defects or irregularities in the [ quiet title ] judgment or the [ quiet title ] proceedings. ” (§ 764.060, italics added.) [5]
In full, the statute provides: “The relief granted in an 5 action or proceeding directly or collaterally attacking the judgment in the action, whether based on lack of actual notice to a party or otherwise, shall not impair the rights of a purchaser or encumbrancer for value of the property acting in reliance on the judgment without knowledge of any defects or irregularities in the judgment or the proceedings.” (§ 764.060.)
Section 764.060 does not define what it means by “knowledge of any defects or irregularities.” Tsasu urges that knowledge means actual knowledge , that the undisputed facts show that it did not have actual knowledge of any “defects or irregularities” in the 2015 Quiet Title Judgment, and that Tsasu is accordingly entitled to summary judgment because it falls within section 764.060’s protection. U.S. Bank urges that knowledge means actual or constructive knowledge , that the undisputed facts show that Tsasu had constructive knowledge that the 2015 Quiet Title Judgment was defective because it constructively knew that Celestine had not named the proper defendant as required by the Act, and that U.S. Bank is accordingly entitled to summary judgment because Tsasu falls outside of section 764.060’s protection.
We are consequently confronted with the question: Does section 764.060’s requirement of no “knowledge” mean no actual knowledge or, instead, no actual and no constructive knowledge? We conclude that section 764.060 requires the absence of both actual and constructive knowledge, and do so for three reasons.
First, defining “knowledge” in section 764.060 to encompass
both actual and constructive knowledge is the result dictated by
the statute’s plain language. (
People v. Maultsby
(2012) 53
Cal.4th 296, 299 [“The statute’s plain language controls unless its
words are ambiguous” ].) Section 764.060 uses the term
“knowledge,” and “knowledge” encompasse s both actual
knowledge
and
constructive knowledge. (
Ham v. Grapeland
Irrigation Dist.
(1916)
Second, defining “knowledge” in section 764.060 to
encompass both actual and constructive knowledge is the result
*14
dictated by the statute’s incorporation of the common law concept
of a bona fide purchaser. When a statute borrows concepts or
language from the common law, we presume the statute also
borrows the common law associated with that concept or
language. (
Scholes v. Lambirth Trucking Co.
(2020) 8 Cal.5th
1094, 1110-1111;
Baker v. Baker
(1859)
For the first time on appeal, plaintiff asks us to infer a
contrary intent from the fact that our Legislature used the
phrase “bona fide purchaser or encumbrancer” in section 764.045
but not in section 764.060 and from the max im that the “different
language in two statutes enacted at the same time” suggests a
*15
“different” meaning. (E.g.,
Ferra v. Loews Hollywood Hotel, LLC
(2019)
Third, defining “knowledge” in se ction 764.060 to
encompass both actual and constructive knowledge is the result
dictated by public policy. (
Union of Medical Marijuana
,
supra
, 7
Cal.5th at p. 1184 [courts may look to “public policy” when
construing statutes].) “Actual” knowledge exists when a person is
subjectively aware of a fact. (E.g.,
In re A.L.
(2019) 38
Cal.App.5th 15, 21.) “Constructive” knowledge exists when a
person is deemed in the eyes of the law to be aware of a fact,
either because (1) the person has “‘knowledge of circums tances
which, upon reasonable inquiry, would lead to that particular fact
. . . [Citations]’” (
Melendrez
,
supra
,
If, as Tsasu suggests, only a person’s
actual
knowledge of a
defect or irregularity in an earlier quiet title judgment can render
section 764.060 inapplicable, then a person would still be entitled
to maintain a property claim based upon a later-invalidated quiet
title judgment even if defects or irregularities in that judgment
had appeared in the record of title for that property and even if
the person had been subjectively aware of facts that, upon further
inquiry, would have revealed those defects or irregularities. This
interpretation of section 764.060 creates wholly perverse
incentives because it discourages prospective buyers from
checking the record of title or from heeding “warning signs”
necessitating further inquiry — lest they acquire actual knowledge
of a defect or irregularity with a quiet title judgment that would
strip them of section 764.060’s protection. Such incentives are
inimical to the entire system of real property law in California,
which places upon real estate buyers a duty to inquire into the
validity of their prospective ownership claim (
Bishop Creek Lodge
v. Scira
(1996)
Tsasu offers four further arguments in support of its position that the only type of disqualifying “knowledge” in section 764.060 is actual knowledge.
First, Tsasu points to the habit of many courts in referring
to constructive knowledge as “constructive notice.” (E.g.,
Vasquez
,
supra
,
Second, Tsasu cites a number of cases indicating that the
term “knowledge” is sometimes used to refer solely to
actual
knowledge. These cases are unhelpful, however, because they
arise in different contexts and do not involve bona fide
purchasers or encumbrancers of real property. (
Merrill v. Pacific
Transfer Co.
(1901)
Third, Tsasu argues that other provisions of the Act use the
word “notice” or “variants of ‘know,’” such that the Act’s use of
the word “knowledge” in section 764.060 is limited to actual
knowledge. (See
Lewis C. Nelson & Sons v. Clovis Unified School
Dist.
(2001)
Lastly , Tsasu asserts that the Act’s legislative history supports its interpretation. The sole citation Tsasu provides does not support its argument, and, as explained above, we conclude that Tsasu’s interpretation of section 764.060 would undermine — not further —the Act’s purposes.
For these reasons, the term “knowledge” in section 764.060 refers to actual and constructive knowledge.
B.
Applying section 764.060
In light of our construction of section 764.060, whether the
Tsasu Deed of Trust retains its priority notwithstanding the
invalidation of the 2015 Quiet Title Judgment turns on whether
Tsasu (1) acquired its interest “for value,” (2) “act[ed] in reliance”
on the 2015 Quiet Title Judgment in acquiring its interest, and
(3) lacked actual and constructive “ knowledge of any defects or
irregularities in th[at] judgment or the proceedings [leading up to
it].” (§ 764.060.) Although “the issue of whether a buyer is a
[bona fide purchaser for value] is a question of fact” (
Melendrez
,
supra
, 127 Cal.App.4th at p. 1254), where the “relevant facts are
not in dispute, [such] questions of fact may be decided as a
matter of law in a summary judgment proceeding.” (
Wang v.
Nibbelink
(2016)
As noted above, a quiet title judgment under the Act must name as defendants those “known to the plaintiff” to have an interest in the property (§§ 761.020, 762.060, subd. (b)), but Celestine knowingly named only a prior owner of the CIT Deed of *20 Trust (that is, CIT Group) rather than its current owner. Tsasu does not dispute that this constituted a defect or irregularity in the quiet title judgment or proceeding.
Tsasu had constructive knowledge of this defect or irregularity in two different ways.
1.
Constructive knowledge from the record of title
First, the record of title for the property contained (1) the
recorded 2015 Quiet Title Judgment setting forth that the sole
defendant was CIT Group, and (2) the recorded assignments of
the CIT Deed of Trust in 2012 and June 2014 (to SASCO and
DLJ Mortgage, respectively) setting forth that CIT Group no
longer owned the CIT Deed of Trust when Celestine filed her
quiet title action. Together, these recorded documents set forth a
defect or irregularity in the quiet title judgment. Because these
documents were recorded, Tsasu had constructive knowledge of
the defect or irregularity in the 2015 Quiet Title Judgment.
(
First Bank
,
supra
,
Tsasu offers three reasons why the documents in the record
of title did not put it on constructive notice of any defect or
irregularity in the 2015 Quiet Title Judgment.
[6]
Tsasu also relies on an expert declaration that was
6
submitted in support of its new trial motion. Because that
declaration was not submitted as evidence in connection with the
cross-motions for summary judgment, we will not consider it — or
Tsasu’s argument relying on it. ( § 437c, subd. (c) [ruling on
summary judgment motion must be based on “ papers submitted ” with the motion];
Szadolci v. Hollywood Park Operating
Co.
(1993)
To begin, Tsasu asserts that courts are “presumed” to have “regularly performed” their “official duty” (Evid. Code, § 664), such that persons reviewing the record of title for the property should be able to assume that, as between a quiet title judgment and other recorded documents calling the judgment into question, the quiet title judgment is correct and the other documents, incorrect. This assertion ignores that the presumption Tsasu cites is a rebuttable one ( id. , §§ 660, 601), and that it is rebutted by the ostensible conflict between the quiet title judgment and other recorded documents. Tsasu makes the further assertion that quiet title judgments under the Act are entitled to an even greater presumption of regularity because, as noted above, they may not be entered “by default” (§ 764.010) . However, the Act’s requirement that judgments must be grounded in evidence says nothing about whether the proceedings leading up to that evidentiary showing were defective or irregular. To accept Tsasu ’s assertion s is to say that there can never be constructive notice on the basis of a conflict in the record of title between a quiet title judgment and other recorded documents, which goes a long way toward excising the phrase “without knowledge o f any de fects or irregularities in the judgment or the proceedings” from section 764.060. We cannot rewrite statutes. ( J.M. v.
Huntington Beach Union High School Dist.
(2017)
Next, Tsasu contends that prospective purchasers or
encumbrancers should not be required to “go behind [the] quiet
motion, and not documents filed later ” ]; see also
Albertini v.
Schaefer
(1979)
title judgment” and to assess the quantum of evidence supporting that judgment, but this contention misstates what the use of “without knowledge” in section 764.060 means. All it means is that the quiet title judgment and other recorded documents available or known to the prospective buyer may, as a whole and on their face, reveal “defects or irregularities” in th at judgment; contrary to what Tsasu suggests, this does not impose a duty of “going behind the judgment” or reweighing the evidence.
Lastly, Tsasu posits that the validity of a quiet title judgment cannot be called into question by conflicts with prior assignments of the pertinent deed of trust because assignments need not be recorded and are often not timely recorded. No matter how assignments might be handled in other cases, the fact remains that the assignments recorded in 2012 and 2014 in this case highlighted a defect or irregularity in the 2015 Quiet Title Judgment.
2. Constructive knowledge from the failure to
conduct a reasonable inquiry
Second, Tsasu was aware of circumstances which, upon reasonable inquiry, would have led to the discovery of that same defect or irregularity. ( Melendrez , supra , 127 Cal.App.4th at p. 1252.) That is because Tsasu (through its CEO) treated its title insurer as its agent when the CEO relied on the insurer’s preliminary report and, by extension, the insurer’s title search in deciding whether to loan Celestine money. Because the title search also reported the quiet title judgment against CIT Group and the two earlier assignments of the CIT Deed of Trust to parties other than CIT Group , and because an agent’s knowledge is imputed to its principal (see Ci v. Code, § 2332 [“As against a principal, both principal and agent are deemed to have notice of whatever either has notice of . . .”] ; Maron v. Swig (1952) 115 *23 Cal.App.2d 87, 90 [knowledge acquired by agent is imputed to principal whether or not that knowl edge was “actually conveyed to” principal] ), Tsasu also had constructive knowledge of the defect and irregularity in the 2015 Quiet Title Judgment by virtue of its insurer’s awareness of these circumstances that is imputed to Tsasu.
Tsasu argues that it was not on “inquiry notice” on the
basis of the information its title insurer learned from the title
search results because a title “insurer’s knowledge is not imputed
to its insured.” (
Lewis v. Superior Court
(1994) 30 Cal.App.4th
1850, 1869;
Estates of Collins & Flowers
(2012) 205 Cal.App.4th
1238, 1255.) Although the bare relationship between a title
insurer and its insured is not enough to make the former an
agent of the latter, a title company
can
sometimes act as an agent
of its insured. (
Bellasi v. Shackelford
(1962)
* * * Because Tsasu had constructive knowledge of defects or irregularities in the 2015 Quiet Title Judgment at the time it *24 acquired its interest in the property, section 764.060 does not insulate Tsasu from the effect of the subsequent invalidation and expungement of the 2015 Quiet Title Judgment. As a result, the CIT Deed of Trust — as the lien recorded first-in-time — has priority over the Tsasu Deed of Trust.
II. Alternative Grounds for Asserting Lien Priority
Even if the priority of the Tsasu Deed of Trust is not preserved under the Act, Tsasu argues that it is preserved by several other doctrines. Tsasu’s arguments fall into two broad categories.
A. Tsasu’s lack of involvement in the proceedings to set aside and expunge the 2015 Quiet Title Judgment
Tsasu argues that it should have received notice of Caliber’s December 2016 motion to set aside the 2015 Quiet Title Judgment as well as Caliber’s subsequent motion to expunge that judgment, and should have been invited to participate in those proceedings. Its absence, Tsasu continues, means that the resulting orders setting aside and then expunging the 2015 Quiet Title Judgment are invalid as to Tsasu because they were issued without the involvement of an indispensable party and in violation of Tsasu’s righ ts to due process. Tsasu is wrong on both counts.
Tsasu was not an indispensable party. A person or entity is
indispensable to litigation if “‘ the plaintiff seeks some type of
affirmative relief which, if granted, would injure or affect the
interest of [the person or entity] not joined . . . . ’” (
Washington
Mutual Bank v. Blechman
(2007)
Tsasu’s due process rights were also not violated when
Caliber did not invite it to participate in its efforts to set aside
and expunge the 2015 Quiet Title Judgment. Due process
guarantees notice and the opportunity to be heard. (
Horn v.
County of Ventura
(1979)
B. U.S. Bank’s alleged failure to act with greater alacrity in seeking to set aside and expunge the 2015 Quiet Title Judgment
Tsasu argues that U.S. Bank should be barred, as an equitable matter, from relying on the orders setting aside and expunging the 2015 Quiet Title Judgment because it waited more than nine months after acquiring the CIT Deed of Trust (that is, from August 2016 until May 2017) before telling Tsasu about the ongoing efforts to set aside and expunge the 2015 Quiet Title Judgment. More specifically, Tsasu relies on the equitable doctrines of (1) estoppel and the balancing of relative negligence under Civil Code section 3543, and (2) laches. Tsasu’s arguments lack merit.
As a threshold matter, we harbor significant doubts that
any of these equitable doctrines may be used to alter section
764.060’s rule specifying how a person who relies on a quiet title
judgment issued under the Act is affected by the subsequent
invalidation of that judgment. Section 764.060 reflects our
Legislature’s thoughtful balancing of the rights of the persons
harmed by an invalid quiet title judgment against the rights of
persons who relied on that quiet title judgment before its
invalidation. Where, as here, a statute reflects a “careful
balancing of competing interests to maintain the overall working
of the system” of law in a particular area, courts are reluctant to
use equity to strike a different balance. (
I.E. Associates v. Safeco
Title Ins. Co.
(1985)
Even if we wer e so inclined, however, Tsasu’s invocation of these equitable doctrines lacks merit in any event.
1.
Estoppel and Civil Code section 3543
Invoking both the equitable doctrine of estoppel and Civil
Code section 3543, Tsasu argues that U.S. Bank was
“inexplicably negligent” by not informing Tsasu of the then -
ongoing efforts to set aside and expunge the 2015 Quiet Title
Judgment. Individually and together, the doctrine of estoppel
and Civil Code section 3543 provide that, as between two
innocent victims, the more negligent of the two should be the one
who suffers the loss. (Civ. Code, § 3543 [“Where one of two
innocent persons must suffer by the act of a third, he, by whose
negligence it happened, must be the sufferer”];
South Beverly
Wilshire Jewelry & Loan v. Superior Court
(2004) 121
Cal.App.4th 74, 81 [holding that Civil Code section 3543 is
“‘ basically an estoppel theory ’”];
Crittenden v. McCloud
(1951)
To benefit from either theory, the party urging application
of that theory must establish that the other party “was, at a
minimum, negligent.” (
WFG National Title Ins. Co. v. Wells
Fargo Bank, N.A.
(2020)
Tsasu cannot rely on estoppel or Civil Code section 3543
against U.S. Bank
because Tsasu cannot establish that
U.S.
Bank
owed any duty to inform Tsasu about the pending motions
to set aside or expunge the 2015 Quiet Title Judgment. The
motions to set aside and expunge the 2015 Quiet Title Judgment
were filed by
Caliber
, not U.S. Bank. Although Caliber had at
that time agreed to serve as U.S. Bank’s attorney -in-fact, it was
undisputed that Caliber filed its motions solely in its capacity as
CIT Group’s successor in interest— and
not
on behalf of U.S.
Bank. As a result, the relevant question regarding duty is this:
Does a nonparty to a case (namely, U.S. Bank) owe a second
nonparty to that case (namely, Tsasu) a duty to notify the second
nonparty about collateral attacks on the judgment brought by a
party in that case just because both of the nonparties might be
affected by the outcome of those collateral attacks? The answer
is “no.” Any other answer would vastly expand the duties of
property owners who just so happen to know about a pending
collateral attack to a quiet title judgment based on defective
service, the result of which could have downstream effects on the
unrelated issue of lien priorities. (E.g.,
Wiener v. Southcoast
Childcare Centers, Inc.
(2004)
But even if we assume that U.S. Bank owed some duty and further assume that U.S. Bank was negligent in not telling Tsasu about Caliber’s efforts to set aside and expunge the 2015 Quiet Title Judgment sooner, Tsasu is still not entitled to relief because Tsasu was in the better position to avoid injury to itself. As noted above, Tsasu had constructive knowledge of the “warning signs” in the record of title for the property indicating possible defects with the 2015 Quiet Title Judgment, and Tsasu nevertheless decided to loan Celestine money and to obtain title insurance. Tsasu could have avoided the injury it suffered had it inquired further into the status of the 2015 Quiet Title Judgment. Nothing U.S. Bank did, however, could have avoided Tsasu’s injury. Caliber— not U.S. Bank — was the entity who sought to set aside and expunge the 2015 Quiet Title Judgment. Although U.S. Bank could have told Tsasu about Caliber’s efforts sooner, there is no evidence in the record to suggest that doing so would have altered the outcome of Caliber’s ef forts: Those efforts turned solely on whether Celestine had sued and served the *30 correct entity, and Tsasu has yet to articulate how it could have offered any evidence on those issues.
2.
Laches
Tsasu next argues that U.S. Bank engaged in delay tactics
by not telling Tsasu about Caliber’s collateral attacks on the 2015
Quiet Title Judgment until May 2017, and that the equitable
doctrine of laches precludes U.S. Bank from relying on the orders
setting aside and expunging that judgment. This argument is
not properly before us because Tsasu did not plead laches in its
operative complaint. Tsasu insists that it did, but the
paragraphs of its complaint it cites say nothing about laches or
about
U.S. Bank’s
delay in informing Tsasu about Caliber’s
efforts. B ecause the “pleadings define the issues to be considered
o n a motion for summary judgment” (
Benedek v. PLC Santa
Monica
(2002)
* * *
In light of our conclusion that U.S. Bank is entitled to summary judgment due to the inapplicability of section 764.060 and the inapplicability of the alternative grounds offered by Tsasu, we have no occasion to reach Tsasu’s challenges to the trial co urt’s evidentiary rulings bearing solely on theories that our analysis has rendered moot.
DISPOSITION
The judgment is affirmed. U.S. Bank is entitled to its costs on appeal.
CERTIFIED FOR PARTIAL PUBLICATION. ______________________, J. HOFFSTADT We concur:
_________________________, P. J.
LUI
_________________________, J.
ASHMANN-GERST