Filed 8/30/18 Yanez v. Kler CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

INOCENCIO SOLIS YANEZ,

Plaintiff and Respondent,

v.

AMANJIT KLER,

Defendant and Appellant.

E067499

(Super.Ct.No. CIVDS1104791)

O P I N I O N

APPEAL from the Superior Court of San Bernardino County. Bryan Foster, Judge. Affirmed.

S.C. Johnson & Associates, Stephen C. Johnson and Arlene M. Turinchak for Defendant and Appellant.

The Law Office of Jeff Grotke and Jeff Grotke for Plaintiff and Respondent.

I. INTRODUCTION

In March 2010, defendant and appellant, Amanjit Kler, acquired a trustee’s deed to two adjoining real properties, Parcels 1 and 2, at a nonjudicial foreclosure sale. In 2011, plaintiff and respondent, Inocencio Solis Yanez, sued Kler, ultimately seeking to quiet title to Parcel 2 and to reform a 2006 grant deed to Parcels 1 and 2 that Yanez and his wife executed in favor of two buyers who later lost both parcels in the foreclosure sale.

When Yanez and his wife signed the 2006 grant deed, Parcel 1 had a house on it and Parcel 2 was a vacant lot. Page 1 of the grant deed included the legal description and the assessor’s parcel number (APN) of Parcel 1, but not Parcel 2. However, Exhibit A to the grant deed included the legal descriptions of both parcels. Between 2007 and 2009, Yanez built a house on Parcel 2, thinking he still owned Parcel 2. Yanez also paid the real property taxes on Parcel 2 until October 2010, when he did not receive the tax bill for Parcel 2. Yanez then discovered that Kler had purchased both parcels in a March 2010 foreclosure sale and that the 2006 grant deed included Parcels 1 and 2.

Following a bench trial, the court determined that, in signing the 2006 grant deed, Yanez and his wife intended to sell Parcel 1 but not Parcel 2, and that Exhibit A was added to the grant deed after Yanez and his wife signed it. Thus, the court ruled the grant deed was void to the extent it included Parcel 2 and reformed the grant deed by cancelling Exhibit A. The court reasoned that a void deed does not vest title in subsequent purchasers, even a bona fide purchaser (BFP). The court found Kler was a BFP of Parcel 1. Judgment was entered accordingly, vesting title to Parcel 2 in Yanez and title to Parcel 1 in Kler.

In this appeal, Kler claims the judgment erroneously deprives him of title to Parcel 2 because he is a BFP of both parcels. Kler also claims the trial court misapplied Civil Code section 3399 in reforming the 2006 grant deed, and abused its discretion in failing to order the compulsory joinder of indispensable parties.

We affirm the judgment.

II. FACTS AND PROCEDURAL BACKGROUND

A. The 2006 Grant Deed

In 1995, Yanez purchased Parcel 1, improved with a single-family residence. The street address of Parcel 1 was “1728,” its APN was “031-01,” and its legal description was “The East 55 feet of Lots 17, 18 & 19 . . . .” In 1999, Yanez purchased Parcel 2, a vacant lot adjoining Parcel 1. At the time, Parcel 2 had no street address. The legal description of Parcel 2 was “Lots 17, 18 and 19 . . . . [¶] Excepting therefrom the East 55 feet of said Lots.” The two parcels were separated by a chain-link fence and bushes.

On May 11, 2006, Yanez signed a listing agreement to sell Parcel 1 for $270,000. Yanez intended to sell Parcel 1 to raise money to build a house on Parcel 2. The listing agreement identified Parcel 1 by its “1728” street address and “031-01” APN, but did not mention Parcel 2. Yanez also “never mentioned” Parcel 2 to his listing agent. Shortly after he signed the listing agreement, Yanez agreed to sell Parcel 1 to Pedro Zamora and Mario Cira for $270,000. Yanez had “never seen” Zamora and Cira “before” and had “[nothing] to do with” their financing to purchase the property.

On June 1, 2006, Yanez and his wife signed the 2006 grant deed in favor of Zamora and Cira, and the grant deed was recorded in June 2006. On its first page, the grant deed states, in typed print, that the property conveyed was “[t]he East 55 feet of Lot(s) 17, 18 & 19 . . . .” As noted, this is the legal description of Parcel 1. The phrase, “Exhibit ‘A’ Attached,” is handwritten immediately under the legal description of Parcel 1 and above the signatures of Yanez, his wife, and the notary. Exhibit A is a single-page document which lists “Parcel 1:” and “Parcel 2:” followed by their respective legal descriptions. Thus, Parcels 1 and 2 were included in the grant deed. A critical issue at trial was whether Exhibit A was attached to the 2006 grant deed after Yanez and his wife signed the deed. Yanez and his wife each testified they did not know whether Exhibit A was attached to the deed when they signed it. Yanez did not recall seeing Exhibit A when he signed the deed. Yanez’s wife did not see Exhibit A when she signed the deed.

B. The Title Officer’s Testimony

A title officer from Orange Coast Title (OCT), C.K., testified for Yanez. In 2006, OCT issued a title insurance policy on Parcels 1 and 2 in connection with the Yanezes’ sale to Zamora and Cira. C.K. was not the title officer on the Yanez file, but she reviewed OCT’s file in the case and testified about customs and practices in the title insurance industry.

As a matter of custom and practice, the escrow company would have prepared the 2006 grant deed, including Exhibit A or the legal description attached to the grant deed. OCT would have played no role in preparing the 2006 grant deed, and the grant deed would have been signed “in escrow.” In addition, the escrow company would have provided OCT with the legal description(s) of the property(ies) to be conveyed by the 2006 grant deed, and OCT would have used that legal description in preparing a preliminary title report and later in issuing a policy of title insurance for the property(ies) conveyed by the grant deed.

Only the APN for Parcel 1 appears on the 2006 grant deed; the APN for Parcel 2 does not. As a matter of custom and practice in 2006, both APNs would have been placed on the grant deed—if the grant deed were conveying both parcels—and OCT would have verified through the county assessor’s office that the APN(s) on the grant deed matched the legal description(s). C.K. could not explain why OCT’s title officer did not ensure that the APN for Parcel 2 was included on the 2006 grant deed. But C.K. explained that, in 2006, the county did not require all APNs to be listed on deeds as a condition of recording the deeds.

On May 23, 2006, OCT issued a preliminary title report (PTR) for Parcels 1 and 2, “a single-family home and a vacant lot.” According to the PTR, the 2006 grant deed did not contain “the full legal” description of the property it conveyed. The PTR shows there were two parcel numbers, each with its own real property tax assessment. According to C.K., Exhibit A to the grant deed (which included the legal descriptions of Parcels 1 and 2) had to be included on the 2006 grant deed; otherwise the 2006 grant deed would not have “pass[ed] title”—that is, OCT would not have approved the 2006 grant deed as a condition of insuring the title of the properties conveyed by the grant deed, unless the grant deed included the same legal descriptions as the PTR.

According to C.K., grant deeds are sometimes corrected after they are signed by the grantors—if the grant deeds contain an inaccurate or an incomplete legal description of the property conveyed. As a matter of custom and practice, the PTR is reviewed and approved by the buyers and the sellers in escrow. Thus, the title company assumes the buyers and sellers have approved the legal description in the PTR, and are purchasing and selling the property described in the PTR.

C.K. did not know whether Exhibit A to the 2006 grant deed was added to the grant deed after Yanez and his wife signed the grant deed in escrow. The 2006 grant deed is “dated” and was “typed” on May 16, 2006; the PTR was issued and available for review on May 23, 2006; and Yanez and his wife signed the grant deed on June 1, 2006. No one from the escrow company testified, however, and no evidence showed that Yanez or his wife ever reviewed or approved the PTR or instructed the escrow company to include Parcel 2 in the sale to Zamora and Cira. The escrow company could have “corrected” the legal description on the 2006 grant deed by adding Exhibit A after escrow received the PTR from OCT.

According to OCT’s file in the Yanez matter, the service center that prepared the PTR sent a message to the title officer that there were two parcels, including a vacant lot; that Yanez owned both parcels; and asking the title officer whether the PTR should include the vacant lot (Parcel 2). Twenty minutes after she received this message, the title officer e-mailed the service center, telling them to include the vacant lot (Parcel 2) in the PTR. As a matter of custom and practice, the escrow company would have instructed the title officer to include Parcels 1 and 2 in the PTR; otherwise, the title officer would not have instructed the service center to include Parcel 2 in the PTR. OCT has no direct contact with the buyer or seller; it only takes instructions from the escrow company. In June 2006, two deeds of trust were recorded against Parcels 1 and 2, in favor of a lender to Zamora and Cira, for a total of $270,000.

C. Yanez Builds a House on Parcel 2 (2007-2009)

In October 2006, Yanez, thinking he still owned Parcel 2, applied for a building permit to construct a house on Parcel 2, and the building permit was issued in August 2007. When Yanez applied for the building permit, the county assigned “1738” as the street address for Parcel 2. In January 2009, Yanez completed construction of the house on Parcel 2, and a certificate of occupancy was issued. Yanez expended considerable sums to obtain the building permit and to build the house on Parcel 2. In January 2009, Yanez insured the house on Parcel 2 for $274,000.

D. Yanez Discovers Kler Purchased Parcels 1 and 2 at the March 2010 Foreclosure Sale

Yanez paid the real property taxes on Parcel 2 from 1999 through March 2010, when he received the first of the two property tax bills for 2010. After Yanez did not receive the second, October 2010 property tax bill for Parcel 2, he and his wife each spoke with the county assessor’s office to ask why they had not received the October 2010 tax bill. Yanez and his wife then discovered that Parcel 2 had been sold with Parcel 1 in 2006, and that Kler had purchased Parcels 1 and 2 in a nonjudicial foreclosure sale in March 2010. Yanez contacted Kler by phone, told Kler he had built and owned the house on Parcel 2, and asked Kler for his help in “fix[ing] this problem.” Kler did not accept any further phone calls from Yanez.

At a March 2010 nonjudicial foreclosure sale, Kler, a real estate investor, acting through an agent and property management company, purchased what Kler believed was the house and property located at 1728, or Parcel 1, for $57,000. Kler’s trustee’s deed includes the legal descriptions of Parcels 1 and 2. Kler did not realize he had purchased two houses at the foreclosure sale. Neither Kler nor his agent inspected or drove by the properties before the foreclosure sale. Kler decided that the opening bid of $57,000 was a good price to pay for whatever property he was purchasing, because a lender had loaned $270,000 on the property.

In April 2010, Kler evicted the tenants who were living at 1728 (Parcel 1). Kler did not attempt to evict the tenants who were living at 1738 (Yanez’s tenants, on Parcel 2) until February 2011. The notice of default and notice of trustee’s sale for the March 2010 foreclosure sale were not served on Yanez or the 1738 address of Parcel 2. The notice of trustee’s sale stated that Parcels 1 and 2 were to be sold. And as noted, Kler’s trustee’s deed states Kler purchased Parcels 1 and 2 at the March 2010 foreclosure sale.

L.J. testified as an expert for Kler concerning the customs and practices of bidders at nonjudicial foreclosure sales. Such bidders understand there is no need for them to inspect the property before they bid on it, because the successful bidder will acquire the title interest in the property that was transferred to the lender at the time the foreclosing trust deed was placed on the property.

E. Procedural Background and the Trial Court’s Decision

In 2012, Yanez filed a third amended complaint against Kler, seeking to quiet title to Parcel 2 and to cancel the 2006 grant deed. In 2016, the matter proceeded to a bench trial against Kler. Shortly before trial, OCT paid Yanez $25,000 pursuant to a good faith settlement agreement.

Following the bench trial, the court issued a statement of decision finding that, when they signed the 2006 grant deed, Yanez and his wife intended to sell Parcel 1 but not Parcel 2 to Zamora and Cira. The court expressly found that Exhibit A to the grant deed was added to the grant deed after Yanez and his wife signed the grant deed. Thus, the court ruled the grant deed was void to the extent it included Parcel 2 and cancelled Exhibit A to the grant deed.

The court reasoned that a void deed cannot form the basis of good title, even to a bona fide purchaser, and that Kler accordingly “took only Parcel 1” in the March 2010 foreclosure sale and had “no title to Parcel 2.” The court expressly stated it was not reforming the grant deed under a theory of mutual mistake. (Civ. Code, § 3399.) The court found Kler was a BFP of Parcel 1. Judgment was entered accordingly, and Kler timely appealed.

III. DISCUSSION

A. Substantial Evidence Supports the Trial Court’s Ruling That the 2006 Grant Deed Was Void Against the Grantees and All Subsequent Purchasers, Including Kler, a BFP

Kler claims he was a BFP of Parcels 1 and 2, and his status as a BFP defeats Yanez’s claims for quiet title and to cancel, void, or reform the 2006 grant deed to exclude Parcel 2. We disagree.

It has long been settled that, if a grantor executes a deed, and a person other than the grantor materially alters or changes the deed without the grantor’s knowledge or consent before the deed is delivered or recorded, the deed is void and vests no title in the grantee or in any subsequent encumbrancers or purchasers, including BFPs. (3 Miller & Starr, Cal. Real Estate (2017 supp.) § 8.53, p. 8-153 (3 Miller & Starr); see, e.g., Lin v. Coronado (2014) 232 Cal.App.4th 696, 702-703, Montgomery v. Bank of America (1948) 85 Cal.App.2d 559, 563-564, Green v. MacAdam (1959) 175 Cal.App.2d 481, 486.)

The trial court here found the 2006 grant deed was materially altered to include Exhibit A after Yanez and his wife signed it, without their knowledge or consent and before the deed was delivered and recorded through escrow. We uphold the court’s findings if substantial evidence supports them. (See Luna v. Brownell (2010) 185 Cal.App.4th 668, 673.) And here, substantial evidence supports the court’s findings.

Yanez and his wife testified that they only intended to sell Parcel 1 to Zamora and Cira when they executed the 2006 grant deed. The May 2006 listing agreement for the sale of Parcel 1 only is consistent with the Yanezes’ testimony. In addition, the record shows that the 2006 grant deed was originally prepared to convey only Parcel 1: Page 1 of the deed included the APN and legal description of Parcel 1, but not the APN or the legal description of Parcel 2. In addition, Yanez did not recall seeing Exhibit A to the deed when he signed it, and his wife testified she did not see Exhibit A when she signed it. According to the title officer, C.K., deeds are sometimes altered after they are signed to “correct” the legal description, or to conform to the legal description in the PTR. C.K.’s testimony indicated that the handwritten phase, “Exhibit ‘A’ Attached,” could have been written on page 1 of the deed after Yanez and his wife signed it, and that Exhibit A could have been attached to the deed after it was signed.

Additionally, no evidence showed that the Yanezes approved the PTR, which was issued by the title insurer, OCT, on May 23, 2006, and which included the legal descriptions of Parcels 1 and 2. The Yanezes’ buyers, Zamora and Cira, did not testify; no one from the escrow company testified; and no one from OCT testified who had personal knowledge of what occurred during the 2006 escrow and the preparation of the PTR. It is unclear who authorized the grant deed to be materially altered to include Exhibit A and Parcels 1 and 2, but substantial evidence shows the Yanezes did not know of or authorize the change.

Lastly, the Yanezes spent considerable sums to build a house on Parcel 2 between 2007 and 2009—after the 2006 sale to Zamora and Cira. This strongly indicated that the Yanezes honestly believed they still owned Parcel 2 after the 2006 sale, and neither knew of nor consented to altering the 2006 grant deed to convey Parcel 2.

B. Kler’s Additional Claims on Appeal

1. The Trial Court Was Not Required to Rely on Civil Code Section 3399

Kler claims that, as a matter of law, the 2006 grant deed could not be reformed to exclude Parcel 2, because Kler was a BFP, and reforming the deed to exclude Parcel 2 caused him harm. Kler relies on Civil Code section 3399, which allows a contract, including a deed, to be reformed based on fraud or mutual mistake, but only “so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.” (Civ. Code, § 3399; Wallace v. Williams (1958) 156 Cal.App.2d 646, 650.)

But here, the trial court expressly stated that it was not reforming the 2006 grant deed to exclude Parcel 2 based on “a theory of mutual mistake,” that is, pursuant to Civil Code section 3399. Instead, the court reformed the grant deed based on the settled principle that a deed that is materially altered without the grantor’s knowledge or consent, after the grantor has signed it and before it is delivered or recorded, is void against the grantee and subsequent purchasers or encumbrancers, including good faith purchasers for value or BFPs. (3 Miller & Starr, supra, § 8.53, p. 8-153; see Lin v. Coronado, supra, 232 Cal.App.4th at pp. 702-703.) This was proper.

As more fully explained in 3 Miller & Starr, supra, section 8.53, page 8-153: “Where a grantor makes and executes a deed, but it is altered or changed by someone other than the grantor, before it is delivered or recorded, and the alteration is without the grantor’s knowledge or consent, the deed is void and no title vests in the grantee. Because the grantee does not receive any title under the void deed, no title vests in a subsequent bona fide purchaser or encumbrancer, and the grantor can reform or rescind the deed against a bona fide purchaser.” (First italics in original, second italics added, fns. omitted.)

This principle has deep roots in California law. In Vaca Valley etc. R.R. v. Mansfield (1890) 84 Cal. 560, the grantee altered a deed to convey two blocks of land without the grantor’s consent, after the grantor signed the blank deed, intending that it would be used to convey other property. The court held the deed was void against a subsequent, good faith encumbrancer for value of the two blocks of land conveyed by the deed. The court observed: “[T]he deed was as absolutely void and as ineffectual to convey any title as it would have been if an entire forgery.” (Id. at p. 566.)

Civil Code section 3399 provides for a different rule which allows a contract or deed to be reformed, but not to the detriment or prejudice of a BFP, when, through fraud or mutual mistake, or the mistake of one party known or suspected by the other, the contract or deed does not express the true intentions of the contracting parties. The trial court did not rely and was not required to rely on Civil Code section 3399 in reforming the 2006 grant deed. Kler cites no authority, and we have found none, that Civil Code section 3399 is the exclusive authority for reforming or voiding a deed, or part of a deed.

2. Zamora and Cira Were Not Indispensable Parties

Kler claims the trial court abused its discretion in reforming the 2006 grant deed to exclude Parcel 2, without ordering the joinder of Zamora and Cira as indispensable parties, and the judgment must be reversed on this ground. (Code Civ. Proc., § 389.) Again, we disagree. Kler has forfeited his right to complain on appeal that Zamora and Cira were not ordered joined as indispensable parties because Kler did not raise the issue in his answer or at trial. (McKeon v. Hastings College (1986) 185 Cal.App.3d 877, 889.)

In any event, the trial court did not abuse its discretion in proceeding with the case without ordering Zamora or Cira joined as parties. “A necessary party is one ‘(1) in [whose] absence complete relief cannot be accorded among those already parties or (2) [who] claims an interest relating to the subject of the action and is so situated that the disposition of the action in [its] absence may (i) as a practical matter impair or impede [its] ability to protect that interest or (ii) leave any of [those] already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of [its] claimed interest.’ (Code Civ. Proc., § 389, subd. (a).)

“A necessary party is ‘regarded as indispensable’ if the court determines ‘in good conscience’ the action must be dismissed in the party’s absence in light of ‘(1) [the] extent [to which] a judgment rendered in the [party’s] absence might be prejudicial to [it] or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the [party’s] absence will be adequate; [and] (4) whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder.’ (Code Civ. Proc., § 389, subd. (b).) [¶] Whether a party is necessary and/or indispensable is a matter of trial court discretion in which the court weighs ‘factors of practical realities and other considerations.’ [Citations.] We review the trial court’s ruling for abuse of discretion. [Citation.]” (Hayes v. State Dept. of Developmental Services (2006) 138 Cal.App.4th 1523, 1529.)

Here, the trial court could not have abused its discretion in failing to order the compulsory joinder of Zamora and Cira as parties in the action, had the court been requested to order their joinder. It was undisputed that Zamora and Cira lost any interest they had in Parcels 1 and 2 when Kler purchased the parcels at the March 2010 foreclosure sale. Further, at the time of trial, there was no indication that a judgment adjudicating the rights of Kler and Yanez in Parcel 2 would adversely affect the interests of Zamora and Cira in those properties, or in any other respect.

Nor did it appear that the court could not adequately adjudicate the rights of Kler and Yanez in Parcel 2, without joining Zamora or Cira as parties. To be sure, the testimony of Zamora and Cira may have been helpful in determining whether Yanez and his wife intended to convey Parcel 2 when they signed the 2006 grant deed. But the testimony of Zamora and Cira was not necessary to that determination, and the rights of Kler and Yanez in Parcel 2 could be adequately adjudicated without joining Zamora and Cira as parties. (See Baines v. Zuieback (1948) 84 Cal.App.2d 483, 491-492 [lessor not indispensable party to action to reform sublease between sublessor and sublessee].)

IV. DISPOSITION

The judgment is affirmed. Yanez shall recover his costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

FIELDS

J.

We concur:

CODRINGTON

Acting P. J.

SLOUGH

J.