Case Name: Jian Jun He, et al. v. Citimortgage, Inc., et al.

Case No.: 18CV329986

Demurrer to First Amended Cross-Complaint

Factual and Procedural Background

First Amended Complaint

Plaintiffs Jian Jun He and Li Rong Liang (“Plaintiffs”) acquired real property commonly known as 2056 Ensign Way in San Jose (“Ensign Property”) on or about March 5, 2013 from JPMorgan Chase Bank National Association (“JPMorgan”) pursuant to a grant deed. (First Amended Complaint (“FAC”), ¶¶9 and 11.)

JPMorgan acquired the Ensign Property on or about January 8, 2013 pursuant to a Trustee’s Deed Upon Sale following a duly noticed foreclosure sale of the Ensign Property under a Deed of Trust dated June 11, 2007 (“Foreclosed Deed of Trust”) and recorded on or about July 2, 2007 executed by To Thi Nguyen and Candice Triet Nguyen (collectively, “Nguyens”). (FAC, ¶12.)

On information and belief, the Nguyens entered into a separate lending transaction with CitiMortgage, Inc. (“Citi”) around the same time but prior to the execution of the Foreclosed Deed of Trust. (FAC, ¶13.) The Nguyens executed a Deed of Trust dated May 25, 2007 (“Citi Deed of Trust”) and recorded on or about June 1, 2007. (Id.) While the address listed on the Citi Deed of Trust is 2056 Ensign Way in San Jose, the legal description of the property and the APN number encumbered by the Citi Deed of Trust described an entirely different parcel of real property commonly known as 1534 Hervey Lane in San Jose (“Hervey Property”). (FAC, ¶¶14 – 15.) The Citi Deed of Trust contained two inconsistent descriptions of real property and is void for uncertainty. (FAC, ¶16.)

The beneficiary rights to the Citi Deed of Trust would change hands no less than five times subsequent to its recording. (FAC, ¶¶17 – 19.) Beginning on or about January 16, 2014, various entities commenced foreclosure proceedings under the Citi Deed of Trust only to later cancel foreclosure and/or rescind the default. (FAC, ¶¶20 – 26.) Defendant Attorney Lender Services, Inc. (“ALS”), purporting to be the trustee appointed under the Citi Deed of Trust, recorded a Notice of Default on or about February 5, 2018 and a Notice of Trustee’s Sale dated May 22, 2018. (FAC, ¶¶28 – 29.) Plaintiffs seek to prevent foreclosure.

On June 18, 2018, Plaintiffs filed a complaint against defendant Citi, ALS, and others asserting causes of action for:

(1) Quiet Title
(2) Cancellation of Instruments
(3) Slander of Title
(4) Declaratory Relief

On July 31, 2018, Plaintiffs substituted defendant US Bank National Association as Legal Title Trustee for Truman 2016 SC6 Title Trust (“US Bank”) for a Doe defendant.

On November 8, 2018, Plaintiffs filed the operative FAC which asserts the same four causes of action asserted in the original complaint.

Cross-Complaint

On February 8, 2019, defendant US Bank filed an answer to Plaintiffs’ FAC and also filed a cross-complaint against Plaintiffs and the Nguyens.

US Bank’s cross-complaint asserted causes of action for:

(1) Declaratory Relief
(2) Reformation
(3) Quiet Title
(4) Equitable Subrogation

On March 5, 2019, Plaintiffs filed a demurrer to US Bank’s cross-complaint.

On June 6, 2019, the court issued an order sustaining Plaintiffs’ demurrer to US Bank’s cross-complaint.

On June 24, 2019, US Bank filed a first amended cross-complaint (“FAXC”). The FAXC alleges the Nguyens were owners of the Ensign Property and borrowed $549,000 secured by the Citi Deed of Trust which was recorded on June 1, 2007. (FAXC, ¶¶3 – 4.) The Citi Deed of Trust was properly and timely indexed to the Ensign Property. (FAXC, ¶4.) US Bank alleges, on information and belief, that Plaintiffs were in possession of the Citi Deed of Trust and/or its recording information prior to purchasing the Ensign Property and had actual notice of the Citi Deed of Trust. (FAXC, ¶4.)

According to the FAXC, the Citi Deed of Trust correctly identifies the real property which secures the loan as the Ensign Property but, due to an inadvertent error, a legal description attached to the Citi Deed of Trust mistakenly corresponds to the Hervey Property. (FAXC, ¶5.) The Nguyens and US Bank (as successor in interest to the original beneficiary of the Citi Deed of Trust) intended the loan to be secured by the Ensign Property and not the Hervey Property. (Id.) The Nguyens acknowledged, affirmed, and represented that the Citi Deed of Trust was a valid and enforceable lien against the Ensign Property. (FAXC, ¶6.) The Nguyens intended the $549,000 loan to be secured by the Ensign Property and not by the Hervey Property. (FAXC, ¶7.) Plaintiffs now claim some right, title, or interest in the Subject Property. (FAXC, ¶8.)

US Bank’s FAXC continues to assert the same four causes of action asserted in US Bank’s original cross-complaint.

On July 19, 2019, Plaintiffs filed the motion now before the court, a demurrer to US Bank’s FAXC.

I. Plaintiffs’ demurrer to US Bank’s FAXC is OVERRULED.

A. Request for judicial notice.

In support of its demurrer, Plaintiffs request judicial notice of various recorded documents. Of relevance to this court’s ruling on the demurrer are exhibits A – D. “[A] court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265.) Accordingly, the request for judicial notice in support of demurrer to cross-complaint, exhibits A – D, is GRANTED. The request for judicial notice in support of demurrer to FAXC is otherwise DENIED. (See Duarte v. Pacific Specialty Insurance Company (2017) 13 Cal.App.5th 45, 51, fn. 6—denying request where judicial notice is not necessary, helpful or relevant.)
B. Merits.

According to Plaintiffs, the FAXC admits the Citi Deed of Trust upon which defendant US Bank relies upon in asserting the FAXC contains the description of two different properties and is, therefore, void for uncertainty. In relevant part, the FAXC alleges, “the [Citi] Deed of Trust correctly identifies the real property which secures the Subject Loan as 2056 Ensign Way, San Jose, California 95133. … However, [US Bank] is informed and believes that, due to an inadvertent error, a legal description was mistakenly attached to the [Citi] Deed of Trust that corresponds to a property located at 1534 Hervey Lane, San Jose, California, APN 343-28-080.” (Cross-Complaint, ¶5.)

It is undoubtedly true that where a deed on its face contains two inconsistent descriptions either of which would identify a different piece of property from that described by the other, there is disclosed a patent ambiguity which, as a general rule, parol evidence is not admissible to remove and the instrument is void for uncertainty.

(Hall v. Bartlett (1910) 158 Cal. 638, 641–642 (Hall); see also Edwards v. City of Santa Paula (1956) 138 Cal.App.2d 375, 382—“a description that is equally applicable to two different parcels is fatally defective;” 3 Miller & Starr, Cal. Real Estate (4th ed.) §8:61—stating the same.)

In opposition, US Bank contends the Citi Deed of Trust is not void as a matter of law because it correctly identifies the Ensign Property by address and is the same address identified in the Adjustable Rate Rider and Adjustable Rate Assumption Rider which area attached to the Citi Deed of Trust. Previously, this court rejected US Bank’s position based on the premise that the ambiguity at issue in this case was a patent ambiguity and extrinsic parol evidence was inadmissible to construe the ambiguity. In support of their demurrer, Plaintiffs rely on In re Black’s Estate (1962) 211 Cal.App.2d 75, 84 (Black’s Estate) for the proposition that parol evidence is inadmissible to construe a patent ambiguity. The actual language from Black’s Estate, however, reads:

It has been generally stated that where the ambiguity is patent parol evidence is inadmissible, but where the ambiguity is latent, such evidence is admissible. (See 18 Cal.Jur.2d §§ 275, 276, pp. 763- 767.) A patent ambiguity is one which appears on the face of the instrument. (Payne v. Commercial Nat. Bank, 177 Cal. 68 [169 P. 1007, L.R.A. 1918C 328]; 18 Cal.Jur.2d § 275, p. 763.) A latent ambiguity is an uncertainty which arises, not by the terms of the instrument itself, but is created by some collateral matter not appearing in the instrument. (Pacific Indem. Co. v. California etc. Ltd., 29 Cal.App.2d 260, 273 [84 P.2d 313]; see Code Civ. Proc., § 1856.) The distinction between patent and latent ambiguities with its incident of excluding or admitting extrinsic evidence, has not been strictly adhered to. Thus ambiguities appearing on the face of the instrument and apparently in the category of patent ambiguities have been explained or interpreted by extrinsic evidence.

(Black’s Estate, supra, 211 Cal.App.2d at pp. 84–85.)

The court is persuaded by US Bank’s argument that the ambiguity here is not patent. Although the legal description attached to the Citi Deed of Trust refers to the Hervey Property, this ambiguity is not patent from the face of the instrument and requires a reader to resort to the referenced map in order to recognize an ambiguity. Moreover, even if patent, Black’s Estate does not stand for an unwavering rule excluding the admission of extrinsic evidence to construe a patent ambiguity.

Plaintiffs’ assertion that they are bona fide purchasers does not save them on demurrer. “In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213 – 214 (Committee).) US bank has alleged Plaintiffs are not bona fide purchasers. (See FAXC, ¶4—“…Plaintiffs were in possession of the Subject Deed of Trust and/or its recording information prior to purchasing an alleged interest in the Subject Property and, therefore, had actual notice of the Subject Deed of Trust.” “The determination whether a party is a good faith purchaser or encumbrancer for value ordinarily is a question of fact.” (Triple A Management Co., Inc. v. Frisone (1999) 69 Cal.App.4th 520, 536.)

Accordingly, Plaintiffs’ demurrer to US Bank’s FAXC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] is OVERRULED.