Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_13-cv-02030/USCOURTS-caed-2_13-cv-02030-6/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1444 Petition for Removal- Foreclosure

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UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

FIDELITY NATIONAL TITLE 

COMPANY,

Plaintiff, 

v.

U.S. SMALL BUSINESS 

ADMINISTRATION, et al., 

Defendants.

No. 2:13-cv-02030-KJM-AC 

ORDER 

AND RELATED 

COUNTER/CROSSCLAIMS 

This case began after East Bay Investors, LLC (EBI) submitted the highest bid in 

the sale of real property near Lake Tahoe. Fredrick and Linda Hodgson are the former owners of 

a motel on that property, the Falcon Lodge, and by counterclaim asserted in this action, they seek 

essentially to undo the sale. The Hodgsons’ notice of lis pendens currently clouds the title of the 

former Falcon Lodge, and EBI moved to expunge it. After reviewing the parties’ briefing, the 

court took the matter under submission without holding a hearing and now grants the motion. 

I. INTRODUCTION AND LEGAL STANDARD 

Lis pendens, literally “pending lawsuit,” is common shorthand for a recorded 

notice that real property is the subject of pending litigation; for all practical purposes it prevents 

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any transfer until the litigation is resolved or the notice is expunged. BGJ Assocs., LLC v. Super. 

Ct. of L.A., 75 Cal. App. 4th 952, 966–67 (1999); Cal. Civ. Proc. Code § 405.24. State law 

provides the rule of decision should a party move to expunge the notice. See 28 U.S.C. § 1964; 

Cal. Civ. Proc. Code § 405.5; see also Rodrigues v. F.D.I.C., No. 12-1243, 2012 WL 1945497, at 

*6 (N.D. Cal. May 30, 2012). 

The California Code of Civil Procedure includes provisions for the recording and 

expunging of a notice of the pendency of an action. Section 405.20 allows “[a] party to an action 

who asserts a real property claim” to “record a notice of pendency of action in which that real 

property claim is alleged.” But “[a]t any time” after that notice is recorded, any other party with 

an interest in the target real property “may apply to the court in which the action is pending to 

expunge the notice.” Cal. Civ. Proc. Code § 405.30. The notice must be expunged if either 

(a) the party who filed the notice does not assert a real property claim or (b) “the court finds that 

the claimant has not established by a preponderance of the evidence the probable validity of the 

real property claim.” Id. §§ 405.31, 405.32. “Probable validity . . . means that it is more likely 

than not that the claimant will obtain a judgment against the defendant on the claim.” Id. § 405.3.

The party who recorded the notice—the party who opposes the motion—bears the burden of 

proof. Id. § 405.30. The court may consider “[e]vidence or declarations” filed with the motion to 

expunge, may conduct a hearing on the matter, and may “make any orders it deems just to 

provide for discovery by any party affected by a motion to expunge the notice.” Id.; see also 

Hunting World, Inc. v. Super. Ct. of S.F., 22 Cal. App. 4th 67, 70–71 (1994) (summarizing 

relevant statutes). 

Here, the Hodgsons are the claimants, the parties who recorded the notice and who 

filed the counterclaim. On this motion they bear the burden to prove at least one of their claims is 

both a real property claim and is more likely than not to result in a judgment in their favor. 

II. BACKGROUND 

A. Factual Background 

Bank of the West (BW) made a business loan to Fredrick and Linda Hodgson in 

July 2000. Wilson Decl. ¶¶ 2–3, ECF No. 167-7; id. Ex. A. The loan included a promissory note 

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with a principal amount of $820,000, id. ¶ 4; id. Ex. B, and was secured by a deed of trust to 8258 

North Lake Tahoe Blvd., Kings Beach, California, 96143 (the property, Falcon Lodge), id. ¶ 5; 

id. Ex. C. In broad strokes, the Hodgsons received a loan in the principal amount and agreed to 

make interest payments to BW; should they default, for example by missing payments, BW had 

the right to record a notice of default and sell the property at public auction. See id. Ex. C, at 6–7. 

The Deed of Trust included several provisions describing the Hodgsons’ obligations. See id.

Ex. C, at 3–4. Among these were duties to “maintain the Property in tenantable condition and 

promptly perform all repairs, replacements, and maintenance necessary to preserve its value”; to 

avoid “any nuisance . . . or waste on or to the Property or any portion of the Property”; and to 

“comply with all laws, ordinances, and regulations . . . of all governmental authorities applicable 

to the use or occupancy of the Property.” Id.

In August 2010, BW sent the Hodgsons a letter declaring their loan was in default.

Id. Ex. H. According to that letter, the Hodgsons had missed payments and had not provided BW 

with current financial information. Id. About six months later, the Hodgsons entered a 

forbearance agreement with BW to temporarily reduce their monthly payments. Id. ¶ 13; id.

Ex. J. Under that agreement, if the Hodgsons defaulted again, the interest rate would revert to the 

rate described in the original loan documents, the entire balance would immediately become due 

and payable, and BW would be entitled to foreclose on the property. Id. Ex. J, at 4–5.

On November 30, 2011, BW sent the Hodgsons a letter again declaring their loan 

in default after missed monthly payments, Wilson Decl. ¶¶ 14–15; id. Ex. K, but the Hodgsons 

never made a payment to BW after August 2011, id. ¶¶ 14, 16. In March 2012, BW sold the loan 

to EBI for about $400,000. See id. ¶¶ 18–25; id. Exs. L–P (purchase and sale documentation). 

The same month, EBI sent a letter to the Hodgsons to inform them EBI had purchased their loan, 

the forbearance period had ended, and payment was due at the original rate until the default was 

cured. Rogers Decl. ¶¶ 20–23, ECF No. 167-9; id. Ex. N. In April 2012 the Hodgsons made 

payments required by the forbearance agreement, but EBI rejected those payments because “the 

Forbearance Period and the modification ended and the original terms . . . were restored.” Rogers 

Decl. Ex. Q, at 3; see also id. Ex. S (rejecting another attempted payment for similar reasons). 

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EBI recorded a notice of default on May 16, 2012. Id. ¶ 31; id. Ex. T. The notice 

listed various failures to perform duties under the deed of trust, including making payments when 

due, paying property taxes, paying fees and expenses to EBI, and “maintain[ing] the property as 

described in the deed of trust.” Id. Ex. T, at 4. The notice of default reported amounts due equal 

to $52,795.03 as of April 10, 2012, which amount would increase, and instructed the Hodgsons to 

contact EBI to “find out the amount you must pay, or arrange for payment to stop the foreclosure, 

or if your property is in foreclosure for any other reason.” Id. Ex. T, at 2–3. The Hodgsons 

slipped a $60,000 cashier’s check under EBI’s door on June 8, 2012, but the amount they owed in 

June had grown to at least $63,002.57, so EBI returned the check with a letter stating EBI’s belief 

“[i]t does not look like you will cure these defaults any time soon” in light of “non-curable nonmonetary defaults.” Id. ¶¶ 32–33; id. Ex. U. The Hodgsons’ attorney then requested EBI 

compute the amount necessary to cure the default, id. Ex. V, and EBI responded, but affirmed its 

belief the Hodgsons would not be able to cure certain other non-monetary defaults, id. Ex. W. 

These non-monetary defaults included “[f]ailure to pay necessary expenses to keep the Property 

operational,” “[f]ailure to maintain and repair the Property to preserve its value,” and failure to 

address Placer County’s order finding the property a nuisance. Id. at 3–4. Neither the Hodgsons 

nor their attorney responded to EBI’s letter, id. ¶ 40, and EBI recorded a notice of trustee’s sale 

on August 28, 2012, id. Ex. BB. 

Fidelity National Title Company conducted a trustee’s sale on November 16, 2012, 

and EBI purchased the property for $610,000.1 Id. ¶ 48. At the time EBI purchased the property, 

the outstanding balance on the Hodgson’s loan totaled $474,517.46. Id. Ex. DD, at 2. The 

property’s sale price therefore exceeded the outstanding loan balance by $135,482.54. Id. After 

facing several demands for the $135,482.54 surplus, Fidelity filed a complaint in interpleader in 

state court on August 13, 2013. Notice of Removal Ex. A, ECF No. 1. 

1

 As noted in previous orders, the trustee’s sale was completed in the midst of a barrage of 

bankruptcy litigation. See Order Nov. 10, 2014, at 3 n.1, ECF No. 134; Order Nov. 13, 2014, at 

2, ECF No. 135. 

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B. Procedural History 

As a preliminary matter, the court grants EBI’s request for judicial notice of 

several state-court and bankruptcy-court filings. Each filing relates to this litigation and is a 

public document whose accuracy is not subject to reasonable dispute. See Fed. R. Evid. 201(b).

By granting this request, however, the court does not assume the truth of any of these documents’ 

contents, but only that each “says what it says.” Jacquett v. Sisto, No. 06-2938, 2008 WL 

1339362, at *1 (E.D. Cal. Apr. 9, 2008). 

On January 25, 2013, the Hodgsons filed a complaint in Placer County Superior 

Court. They alleged a trust managed by Robert Ferrari was “using EBI” in an “attempt[] to steal 

the property . . . by buying the loan from Bank of the West and refusing [the Hodgsons’] 

payments to make the loan current.” EBI Request J. Notice Ex. 16, ¶ 22, ECF No. 168-6 

(capitalization altered). They recorded a notice of pendency of that action. Rogers Decl. Ex. EE.

The case was removed to bankruptcy court, voluntarily dismissed, and the notice of pendency of 

action was expunged. EBI Request J. Notice Ex. 27, ECF No. 168-7. 

In June 2013, EBI filed a complaint for unlawful detainer, id. Ex. 21, to which the 

Hodgsons generally demurred, id. Exs. 23, 24. The Hodgsons argued EBI had improperly 

classified the case as one of limited jurisdiction, because the case, brought under California Code 

of Civil Procedure § 1161a, “necessarily trie[d] the plaintiff’s title to the property,” and that 

property was worth more than $25,000. Id. Ex. 23, at 6. The clerk entered a possession-only 

default judgment of unlawful detainer in favor of EBI, which provided that EBI was “entitled to 

possession of the premises.” Id. Ex. 24;see Cal. Civ. Proc. Code § 1169.2

On September 30, 2013, ECF No. 1, the United States Small Business 

Administration removed Fidelity’s interpleader complaint to this court. Notice of Removal, ECF 

No. 1. On January 18, 2014, the Hodgsons filed a notice of pendency of action, the notice EBI 

2

 That section provides, in part, “If, at the time appointed, any defendant served with a 

summons does not appear and defend, the clerk, upon written application of the plaintiff and 

proof of the service of summons and complaint, shall enter the default of any defendant so served, 

and, if requested by the plaintiff, immediately shall enter judgment for restitution of the premises 

and shall issue a writ of execution thereon.” Cal. Code Civ. Proc. § 1169. 

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seeks to expunge by this motion. ECF No. 22. They filed a counterclaim on May 13, 2014 after 

receiving leave of this court, Order May 12, 2014, ECF No. 32; Counterclaim, ECF No. 33. The 

Hodgsons amended their counterclaim on December 1, 2014, after the court granted EBI’s motion 

to dismiss the original in part. Order Nov. 11, 2014, ECF No. 134; First Am. Counterclaim, ECF 

No. 136. 

As noted above, the Hodgsons must show at least one of the claims in their first 

amended counterclaim is a real property claim likely to be resolved in their favor. EBI has 

pointed out two procedural defects in the Hodgsons’ notice, one of which is dispositive. 

III. DISCUSSION 

A. Service of Notice 

“[N]o plaintiff has the right to ambush a property owner by surreptitiously 

recording a lis pendens.” Bergman v. Tobin, No. 11-1866, 2012 WL 5471796, at *4 (E.D. Cal. 

Nov. 9, 2012), report and recommendation adopted, 2012 WL 6088293 (E.D. Cal. Dec. 6, 2012) 

(citing Biddle v. Super. Ct. of Orange Cnty., 170 Cal. App. 3d 135, 137 (1985)). A party who 

records a notice of a pending action must serve a copy of the notice on all “parties to whom the 

real property claim is adverse and to all owners of record of the real property affected by the real 

property claim.” Cal Civ. Proc. Code § 405.22. The state court of appeal has cautioned against 

“slavish adherence to the technical requirements of service,” as long as “actual notice” is 

achieved. Biddle, 170 Cal. App. 3d at 138. In light of EBI’s delay in raising this defect and its 

actual notice of this litigation, the court declines to grant its motion on this basis. 

B. Leave to File a Successive Notice 

As described above, the lis pendens at issue here is the second the Hodgsons have 

recorded. “Once a notice of pending action has been expunged, the claimant may not record 

another notice of pending action as to the affected property without leave of the court in which 

the action is pending.” Cal. Civ. Proc. Code § 405.36. The statute may allow for some lenience. 

See Rebco Development, Inc. v. Super. Ct., 67 Cal. App. 3d 13, 17–18 (1977).3

 In Rebco, the 

3

 The code comment attached to section 405.36 suggests the legislature meant to codify 

earlier decisional authority. See Cal. Code Civ. Proc. § 405.36, code comment (citing Ranchito

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court determined that because the issues in the first and second expungement hearings differed 

and the trial court had not considered these differences, and because the notices were filed in 

different actions between different parties, collateral estoppel did not bar the second notice. Id.

In a later decision, the court of appeal distinguished Rebco and held that a party could not 

“record, at will, a second notice of lis pendens after the first had been expunged” because this 

“tactic” would “interfere[ ] with the status established by the court’s order.” Ranchito Ownership 

Co. v. Super. Ct., 130 Cal. App. 3d 764, 771 (1982). 

Here, the Hodgsons recorded their first notice after filing a state court action 

against EBI. See Rogers Decl. Ex. EE; EBI Request J. Notice Ex. 16. As noted above, they 

alleged EBI was part of a conspiracy to deprive them of the property and alleged breach of 

contract, fraud, intentional infliction of emotional distress, negligent misrepresentation, violations 

of Business and Professional Code section 17200, et seq., and wrongful foreclosure. Id. They 

voluntarily dismissed the case and the notice of lis pendens was expunged. Id. EBI Request J. 

Notice Ex. 27. Although these actions were initiated in separate courts, the Hodgsons’ claims in 

each are similar. Moreover, in both this and the previous case, the Hodgsons are the plaintiffs, 

EBI is a defendant, and the action concerns the same property. The plain language of section 

405.36 leaves little doubt it applies here: once the previous notice was expunged, the Hodgsons 

could not “record another notice of a pending action as to the [Falcon Lodge] without leave of 

[this court,] the court in which the action is pending.” Cal. Code Civ. Proc. § 405.36. 

The Hodgsons’ attempt to distinguish this action from the previous bankruptcy 

case misses the mark. The bankruptcy case was terminated by their voluntary dismissal and was 

no longer pending, so the outstanding notice should naturally have been expunged. Because their 

dismissal was without prejudice, however, they were permitted to pursue their claims in a later 

litigation, for example, by their current counterclaim. For that reason, this case is effectively the 

same case as the bankruptcy case, and they were required by section 405.36 to request leave 

 

Ownership Co. v. Super. Ct., 130 Cal. App. 3d 764 (1982), in turn citing Rebco, 67 Cal. App. 3d, 

at 17–18)). 

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before recording a new notice. To hold otherwise would allow a plaintiff to sue, record a notice 

of pending action, voluntarily dismiss the claim without prejudice, and strategically burden their 

adversary with a new claim and new notice at will. This is exactly the “abuse . . . the statute was 

intended to cure.” Ranchito, 130 Cal. App. 3d at 771. 

Because the Hodgsons’ notice is procedurally defective, the court need not reach 

the probable validity of their claims. 

IV. CONCLUSION 

The motion is GRANTED. The Notice of Pendency of Action recorded in the 

Placer County Recorder’s Office on January 21, 2014, by Fredrick and Linda Hodgson for 8258 

North Lake Tahoe Blvd., Kings Beach, California, 96143, document number 2014-0003970-00, is 

EXPUNGED. This order disposes of ECF No. 167. 

IT IS SO ORDERED.

DATED: November 12, 2015. 

UNITED STATES DISTRICT JUDGE 

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