Tsasu LLC v. U.S. Bank Trust, N.A.

• Decision Date: 01 April 2021
• Docket Number: B298589
• Court: California Court of Appeals Court of Appeals
• Parties: TSASU LLC, Plaintiff and Appellant, v. U.S. BANK TRUST, N.A., as Trustee, etc., Defendant and Respondent.

62 Cal.App.5th 704

277 Cal.Rptr.3d 76

TSASU LLC, Plaintiff and Appellant,

v.U.S. BANK TRUST, N.A., as Trustee, etc., Defendant and Respondent.

B298589

Court of Appeal, Second District, Division 2, California.

Filed April 1, 2021

Certified for Partial Publication.^*

Garrett & Tully, Ryan C. Squire, Motunrayo D. Akinmurele, Pasadena, and Linda R. Echegaray, Rosamond, for Plaintiff and Appellant.

Perkins Coie, David T. Biderman, Los Angeles, and Ofunne N. Edoziem for Defendant and Respondent.

HOFFSTADT, J.

Under California's Quiet Title Act ( Code Civ. Proc., § 760.010 et seq. )¹ (the Act), a third party who "act[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).

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. Celestine'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 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 Initio, for all purposes" (2016 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 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 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 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) 194 Cal.App.4th 939, 956, 124 Cal.Rptr.3d 78 [arguments not supported by "reasoned argument"; waived]; Raceway Ford Cases (2016) 2 Cal.5th 161, 178, 211 Cal.Rptr.3d 244, 385 P.3d 397 [arguments raised for first time in reply brief; waived].) We will consequently limit our review to the trial court's summary judgment ruling.

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)...