Case Number: VC063836    Hearing Date: July 10, 2014    Dept: SEC

***AMENDED***

VALENZULA v. YAMAMOTO EQUITY, INC.
CASE NO.: VC063836
HEARING: 07/10/14

#9
TENTATIVE ORDER

Real party in-interest RAUL MARES’s motion is DENIED with respect to (1) the request to intervene and (2) the request to strike certain portions of the pleading, and GRANTED as to the request to expunge lis pendens. C.C.P. § 405.30.

The party prevailing on the motion is entitled to attorney’s fees and costs. C.C.P. § 405.38. Plaintiff is ORDERED to pay third party Mares’s attorney’s fees in the amount of $4,800 (based on 16 hours at the rate of $300/hr.) and $495 in costs, for a total of $5,295.

As a preliminary matter, the Court notes that the subject motion improperly combines three separate and distinct requests for relief. Filing one document raising various issues makes the motion more difficult to read and more difficult for the opposing party to respond. Generally, separate motions should be filed.

In this case, Mr. Mares seeks an order allowing him to intervene in the action and an order striking certain portions of the pleading (to which he is not yet a party). He also seeks an order expunging the lis pendens, along with attorney’s fees and costs.

Complaint
Plaintiff ALBERTO VALENZULA brought this action as trustee of the Nature Intended Trust. The complaint addresses two primary issues: claims arising from his sale of certain real property located in San Bernardino, CA to defendants Claude Prickett and Geremy Yamamoto and claims arising from his purchase of securities from defendant Prickett effected through his corporation, co-defendant Pacific Clara Renovation Corp.

As alleged, in May 2011, plaintiff and the individual defendants, through co-defendant Yamamoto Equity, Inc. (“Yamamoto”), negotiated a sales agreement of the subject property in the amount of $500,000, with $190,000 of that amount to be paid by a promissory note secured by a Deed of Trust. Comp., ¶24. The alleged agreement is attached to the pleading as Exhibit D. Subsequently, in May 2013, the parties entered into an addendum to the purchase agreement and joint escrow instructions. Comp., Exh. E.

In June 2013, plaintiff signed a Grant Deed to defendant Yamamoto. Comp., ¶27. Due to an ambiguity in the agreement, plaintiff mistakenly believed that the conditions of escrow had been satisfied when in fact the defendants had failed to give to plaintiff a promissory note secured by a valid Deed of Trust. Id.

In relation to the sale transaction, plaintiff asserts causes of action for (1) fraud, (2) negligent misrepresentation, (3) declaratory relief (cancellation of grant deed), (4) quiet title, (5) breach of contract and (6) breach of the implied covenant of good faith and fair dealing.

At the same time plaintiff filed the verified complaint, on February 14, 2014, plaintiff filed a Notice of Pendency of Action. It was recorded on February 25, 2014. Mares’s Request for Judicial Notice, Exh. A.

Motion to intervene
In January 2014, Yamamoto sold the subject property to real party in interest Raul Mares. A Grant Deed was recorded on February 11, 2014. RJN, Exh. 1. According to his declaration, Mares paid $535,000 for the property and is a bona fide purchaser.

Mares, as the record title holder, seeks to intervene in the action because plaintiff’s causes of action to cancel the deed (declaratory relief) and to quiet title are against his interests.

Under Code of Civil Procedure section 387, any person who has an interest in the matter of litigation may intervene. Where his interests relate to real property and may be impeded if he is not adequately represented, the court shall permit the intervention. C.C.P. § 387(a),(b).

There is no question that Mares has an interest in title to the subject real property. His motion, however, is procedurally defective in that he failed to submit a proposed complaint in intervention. Intervention is effected by the filing of a complaint which sets forth the grounds upon which intervention rests. Failing to submit a pleading is fatal to the request to intervene. Sutter Health Uninsured Pricing Cases (2009) 171 Cal.App.4th 495, 513. That portion of the motion is denied.

Motion to strike
Mares also seeks to have stricken the 3rd and 4th causes of action, by which plaintiff seeks title to the subject property. Mares is not a party to the action and thus lacks standing to challenge the causes of action alleged.

The request is also denied on substantive grounds, as Mares has not demonstrated that the challenged causes of action are “irrelevant, false or improper.” C.C.P. § 436(a). Determination of the viability of plaintiff’s claims requires consideration of facts beyond the pleading and documents subject to judicial notice. That portion of the motion is also denied.

Expunge lis pendens
Any nonparty with an interest in the real property affected thereby may file a motion to expunge a notice of lis pendens. C.C.P. § 405.30.

Mares argues that the complaint does not state a real property claim. C.C.P. § 405.31. He cites plaintiff’s failure to classify the action as such on his Civil Case Cover Sheet. RJN, Exh. 2, 3. Errors on the Cover Sheet do not take precedence over the substance of the allegations, which support plaintiff’s claims for declaratory relief and quiet title. Additionally, Mares’s challenge as to whether the complaint was filed in the proper venue does not negate the nature of the claims therein. The pleading asserts a real property claim.

The issue is whether plaintiff has established, by a preponderance of the evidence, the probable validity of his real property claim. C.C.P. § 405.32.

Here, Mares contends that he is a bona fide purchaser for value and thus took title to the property fee and clear of any of plaintiff’s underlying claims. See Melendrez v. D&I Investments, Inc. (2005) 127 Cal.App.4th 1238. As noted in the moving papers, a bona fide purchaser is one who acquires his interest in the property without knowledge of the other’s rights. Id.; Nguyen v. Calhoun (2003) 105 Cal.App.4th 428.

Mares contends that he did not have notice of plaintiff’s claimed interest in the property. Mares decl. He notes that the “Supplemental Statutory and Contractual Disclosures” made by Yamamoto do not indicate any adverse claims. Mares decl., Exh. 5. Mares also notes that the February 25, 2014 recordation of the lis pendens was after both the sale on January 28, 2014 and his recordation of the Grant Deed on February 11, 2014. He claims that he did not have constructive notice of plaintiff’s alleged interest in the property.

Mares thus contends that even if plaintiff is successful in his underlying fraud action against the named defendants, as a BFP, he is not chargeable with the fraud and takes clear title. Melendrez, supra.

Plaintiff challenges Mares’s BFP status for several reasons. As noted in Yamamoto’s counteroffer, the property was sold by the defendants to Raul Mares, Martiniano Mares and Brenda Ho, and that Brenda Ho was related to the selling agent. Decl. of Alexis Saab, Exh. A. Plaintiff notes that the sale transaction took 8 days notwithstanding that there were issues with the chain of title. Exh. C. The Multiple Listing Service (MLS) indicated that the transaction between plaintiff and Yamamoto was not an arm’s length transaction and also indicated a low purchase price on the part of Yamamoto, which means it has a higher risk of fraud. Saab decl., Exh. B, p. 4. Ms. Saab, a licensed real estate agent, examined the relevant documents and noted that it is difficult to exercise due diligence in 8 days, and concluded that Mares was on inquiry notice and thus not a bona fide purchaser.

The recorded documents do not support plaintiff’s conclusion that the chain of title itself was problematic. Plaintiff recorded the Grant Deed transferring the property from the Rubios to the Trust. Saab decl., Exh C., p. 21. Yamamoto then recorded the Grant Deed whereby it obtained the property from plaintiff. Exh. C., p.28.

Mares’s objection to the Saab declaration is well-taken. The issue of BFP is a question for the trier of fact. As such, expert testimony is not allowable to resolve that factual dispute. Summers v. A.C. Gilbert Co. (1999) 69 Cal.App.4th 1155.

While the purchase price paid by Yamamoto was significantly less that the selling price to Mares, a BFP need not pay fair market value to qualify as such. Melendrez, supra. The MLS, which indicated plaintiff’s sale was not an arm’s length transaction, is not a publicly recorded document and thus cannot be used to impute constructive notice on Mares.

As stated in the declaration of Jeannie Nguyen, the selling agent for Mares, Brenda Ho is her sister who was ultimately not placed on title to the property. That relationship does not raise any issues with respect to Mares’s status.

Plaintiff proffers his own declaration in which he states that he does not speak English well as did not understand the instrument he signed and instead relied on defendant Prickett’s fraudulent representations. He claims that, as a result of the fraud, the Grant Deed is void and Mares did not take good title. Under those facts, the deed is voidable but not void as a matter of law. See Erickson v. Bohne (1955) 130 Cal.App.3d 533.

Although a void instrument cannot generally carry title, an innocent encumbrancer may invoke the doctrine of equitable estoppel to prevail over the party who, through his own negligence, enabled the injury to occur. See Miller v. Wood (1963) 222 Cal.App.2d 206; C.C. § 3543.

For those reasons, the Court is persuaded that plaintiff has not established a probability of prevailing on the merits of his quiet title claim as against third party Mares. Accordingly, the motion to expunge the lis pendens is granted.

Evidentiary objections
The Court considered the points raised in the declaration of Alexis Saab regarding notice, as indicated by the analysis set forth above. Mares’s objection to the declaration is SUSTAINED to the extent the Court is not bound by her “expert” conclusion that Mares does not qualify as a BFP.

Plaintiff’s objection to the declaration of Jeannie Nguyen, on the ground it was new evidence improperly submitted with the reply, is OVERRULED. Mares submitted the declaration to respond to plaintiff’s contention regarding Brenda Ho (as noted above).