Filed 12/8/14 Candelaria v. Valencia CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication 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

SECOND APPELLATE DISTRICT

DIVISION FOUR

MARGIE M. CANDELARIA,

Plaintiff and Appellant,

v.

LEONEL VALENCIA,

Defendant and Respondent.

 B252768

 (Los Angeles County

 Super. Ct. No. PC051712)

APPEAL from a judgment of the Superior Court of Los Angeles County, Stephen 

P. Pfahler, Judge. Affirmed.

Forry Law Group, Craig B. Forry, for Plaintiff and Appellant.

Russell J. Thomulka, for Defendant and Respondent.
2

Plaintiff Margie Candelaria brought suit against defendants Leonel Valencia and 

Daniel Mendoza, whom she alleged duped her into conveying to Mendoza a one-half 

interest in real property located at 18223 Sandringham Court, Los Angeles, so that 

Valencia could later encumber and foreclose the property. In addition to her fraud claim, 

Candelaria asserted claims for quiet title and declaratory relief. Valencia sought relief 

against Mendoza as well as the application and enforcement of an equitable mortgage on 

18223 Sandringham Court. After a bench trial, the trial court granted judgment in favor 

of both Candelaria and Valencia against the absent Mendoza, in the amounts of $40,000 

and $120,000, respectively. The trial court also granted judgment for Candelaria against 

Valencia, “in that the Court quiets title on the property as of June 21, 2011,” and 

judgment for Valencia against Candelaria on the equitable mortgage count in the amount 

of $40,000, which Candelaria was to pay as a condition precedent to the quieting of title

and declaratory relief. Candelaria timely appealed. We affirm. 

FACTUAL BACKGROUND

Plaintiff Margie Candelaria’s daughter, Pauline Macareno, is the sole owner of 

Hopevale Development, Inc. (“Hopevale”), a company that purchases, rehabilitates, and 

resells distressed real properties. Hopevale purchased a home located at 18223 

Sandringham Court, Los Angeles, for $350,000 in May 2010. Hopevale spent the next 

few months rehabilitating the Sandringham Court home. Macareno’s then-fiancé, 

defendant Daniel Mendoza, assisted with the rehabilitation. Mendoza helped Macareno

secure favorable pricing on some construction materials, performed menial job-site tasks 

“[l]ike a gopher,” and supervised some of the workers on the project. Mendoza did not 

perform substantive labor, did not act as contractor, and was not authorized to make any 

representations on behalf of Hopevale. Nonetheless, he served as the primary point of 

contact with at least one of the vendors on the project, defendant Leonel Valencia, who 

owns a trash-bin rental company. Valencia testified that Mendoza sometimes was the 

one who paid him when he delivered trash bins to the job site, and that these payments 
3

sometimes were in the form of checks issued by “Mendoza Properties.” Valencia 

believed that Mendoza was a supervisor at the job site and that Mendoza and Macareno 

were business partners who bought the Sandringham Court home together. 

In October 2010, Hopevale sold the Sandringham Court home to Candelaria for 

$800,000, its appraised value as of August 28, 2010. Candelaria, who has only a tenthgrade education and allows Macareno to handle all of her financial affairs, viewed the 

Sandringham Court home as “a long term investment” and a “tax deduction.” Candelaria 

took title to the Sandringham Court home in her own name, but allowed Macareno, 

Mendoza, Macareno’s daughter, and her own son, Erik, to live at the residence. 

Hopevale purchased a home on Telfair Avenue in Los Angeles for $100,000 on 

August 8, 2010. After investing several thousand dollars and about one month of work 

into the Telfair Avenue home, Hopevale sold it to Valencia for the “wholesale” price of 

$185,000. Valencia testified that Mendoza was involved with the Telfair Avenue home 

transaction; he stated that “Pauline and Daniel offered me the Telfair.” Valencia resold 

the Telfair Avenue home for $260,000 in December 2010, realizing a profit of about 

$20,000. 

In the wake of his successful “flip,” Valencia continued transacting business with 

Mendoza and Macareno. On November 12, 2010, he provided Mendoza with a $20,000 

cashier’s check payable to Mendoza Properties. On December 29, 2010, Valencia gave 

Mendoza a second cashier’s check, in the amount of $117,000, payable to Mendoza 

Property. Mendoza prepared a “Note and Promise to Pay” in conjunction with the latter 

check. The note referenced property at 6917 Alcove Avenue, North Hollywood, and by 

its terms obligated Mendoza to repay $140,000 plus net profits from the sale of the 

Alcove Avenue property. The note further stated that the profits from the sale of the 

Alcove Avenue property would be split between Hopevale and LV Trucking, Inc., 

Valencia’s trash-bin company. The note was scheduled to mature on “Friday, May 27th, 

2011, which is a 6-month period for property to be listed and sold in a Real Estate 

Transaction.” Both Mendoza and Valencia signed the note. Macareno had no knowledge 
4

of the note or the loans it inartfully purported to secure. And, of course, Mendoza had no 

authority to pledge Hopevale’s profits.

More problematically, Mendoza did not have–and never would have–any interest 

in the property located at 6917 Alcove Avenue. As of the dates of the two cashier’s 

checks and the promissory note, none of the players in this case had any interest in the 

Alcove Avenue property. Hopevale eventually purchased the property, but did not close 

the sale until March 1, 2011. It financed the $280,000 purchase price with a $230,000 

mortgage loan secured by a deed of trust on the property and an additional $55,000 

unsecured contribution from Valencia. Macareno was aware of Valencia’s $55,000 

contribution, which he had negotiated with Hopevale; she and Valencia both intended the 

money to be used as a down payment for the purchase of the Alcove Avenue property. 

Valencia’s $55,000 cashier’s check, which was made payable to and deposited directly 

with the escrow agent, included the subject line “RE: MENDOZA.” 

The Alcove Avenue home had not been resold by May 27, 2011, the maturity date 

of the note Mendoza issued to Valencia. Valencia initially was not disappointed that 

Mendoza did not timely repay him as promised, “because we had already done business 

before and everything had turned out fine so [he] thought [they] were just going to 

continue on.” Valencia became concerned, however, when he learned around the same 

time that Macareno and Mendoza “were no longer together” and “started worrying 

because [he] had nothing in his hands that would ensure [him].” Valencia tried to speak 

to Mendoza and Macareno jointly, but he “could never get them together.” He only 

managed to talk to Mendoza, who promised to pay Valencia but never explained how he 

planned to do so. 

At some point in late June or early July 2011, Valencia contacted Macareno and 

asked for a deed of trust in the Alcove Avenue home. Based on her understanding that 

Valencia had contributed only $55,000 to the project, Macareno called Rose Lucero, an 

escrow agent and notary public with whom she had worked in the past, and asked her to 

prepare a deed of trust in the Alcove Avenue home for that amount. Lucero prepared the 
5

document, dated July 8, 2011, and Macareno executed it on July 13, 2011. Macareno left 

a copy of the deed of trust for Valencia to pick up. 

When Valencia retrieved the deed of trust, he informed Macareno that it was 

incorrect as to the amount and terms he had been promised. Valencia told Macareno that 

he had been promised more by Mendoza. Valencia did not show Macareno any 

documentation to back up his claim that he gave Mendoza “a lot more money than this, 

than $55,000,” however. Macareno told Valencia to take up his concerns with Mendoza, 

with whom she was no longer speaking. 

Valencia spoke to Mendoza, who assured him that the remaining debt could be 

secured by a deed of trust on another property that Mendoza owned: the Sandringham 

Court home. Although Candelaria originally took title to the Sandringham Court home in 

her own name, she had transferred a one-half interest to Mendoza by grant deed on June 

21, 2011. Candelaria testified that she was unaware the document she signed before 

notary Lucero on June 21, 2011, was a grant deed that gave Mendoza one-half interest in 

her property; she did not read the document and thought it was a note representing a 

$90,000 debt Mendoza was owed for his work on the Sandringham Court home.1 

Mendoza told Candelaria that “he was owed some money from [Macareno], and that it 

was a $90,000 amount, and that he had spoken to [Macareno] in regards to the money 

being owed to him and for [Candelaria] to go ahead and get a note signed for him to get 

reimbursed.” Candelaria called Macareno to tell her about the arrangement, but 

Macareno was on vacation and Candelaria did not hear back from her. Mendoza did not 

explain–and Candelaria did not understand, even though she knew that he had no interest 

in Hopevale–that in fact he was owed nothing and that she was transferring a one-half 

 

1 Macareno testified that when her relationship with Mendoza ended in May 2011, 

“he felt that since he helped me with the development [of the Sandringham Court home] 

that he should be entitled to some kind of monies for his efforts.” According to 

Macareno, Mendoza claimed an $80,000 interest in the property “because he helped [her] 

with the dealings of the subcontractors, with the dealings of that. He didn’t want to walk 

away empty-handed.” No objections were made to this hearsay testimony.
6

interest in the Sandringham Court home to him. Notary Lucero, who witnessed the 

execution of the grant deed, testified that Candelaria voluntarily signed the document 

without asking any questions. The grant deed was recorded on June 22, 2011. Another 

witness, a friend of Mendoza’s, testified that Mendoza later bragged to him about tricking 

Candelaria into giving him a one-half interest in her property. 

Mendoza showed the Sandringham Court grant deed to Valencia. Valencia, who 

testified at trial through a Spanish interpreter, believed that the grant deed was legitimate.

Mendoza then prepared a deed of trust giving Valencia a $160,000 lien on “his” interest 

in the Sandringham Court property. Valencia “trust[ed] the papers” Mendoza prepared, 

even though he no longer trusted Mendoza personally, because he and Mendoza were in 

front of a notary public (Lucero) and Mendoza had signed them. Valencia thus accepted 

the deed of trust executed on July 13, 2011 as security for the $160,0002 Mendoza still 

owed him. Lucero, who witnessed the signing of all the pertinent documents in this case,

testified that Mendoza asked her to prepare several deeds of trust to settle his debt with 

Valencia, but that several of the documents he requested she prepare and notarize were 

invalid because Mendoza had no interest in the properties he was seeking to encumber. 

Lucero testified that she advised Mendoza of the invalid nature of these documents. 

Lucero did not recall personally preparing the deed of trust encumbering the 

Sandringham Court home or advising Valencia that it was invalid. 

Macareno did not learn that Candelaria had given Mendoza a one-half interest in 

the property until Candelaria received a notice from the tax assessor’s office in August 

2011. Candelaria did not discuss the matter with Macareno upon the latter’s return from 

vacation because Candelaria “assumed that she knew everything was okay.” Macareno 

 

2

The origin of the $160,000 figure is unclear, as the cashier’s checks totaled 

$137,000 and the “Note and Promise to Pay” did not state that Valencia was entitled to 

$160,000. Nonetheless, the deed of trust that Mendoza gave Valencia securitized “the 

principal sum of $160,000,” both Candelaria and Valencia specifically requested relief in 

that amount during their closing arguments, and the trial court’s judgment suggests that it 

credited the $160,000 figure. 
7

“almost had a heart attack” when she opened the envelope and saw that her mother had 

conveyed a one-half interest in the Sandringham Court home to Mendoza. Candelaria 

was “bewildered” by Macareno’s reaction because Mendoza had told Candelaria that 

Macareno had wanted her to sign the document. Candelaria trusted Mendoza because 

“he was going to be [her] son-in-law.” Macareno had not informed her mother of her 

break-up with Mendoza or her concerns about his honesty. Candelaria similarly made no 

efforts to inform herself what was going on between Macareno and Mendoza because she 

“didn’t really want to know or get involved with their relationship.” Candelaria was “not 

totally sure” when Mendoza moved out of the Sandringham Court home but thought it 

might have been in May 2011. 

The Alcove Avenue home sold several months later, in January 2012. Valencia 

recovered his $55,000 contribution, with interest, when the sale closed, pursuant to the 

deed of trust Macareno issued him. Mendoza never repaid Valencia for the other two 

cashier’s checks.

PROCEDURAL HISTORY

Candelaria filed a three-count verified complaint against Mendoza and Valencia 

on October 11, 2011. She alleged that Mendoza and Valencia defrauded her. In addition 

to compensatory and punitive damages for the alleged fraud, Candelaria sought 

declaratory relief and requested that the court quiet title on the Sandringham Court home 

as of June 21, 2011. Mendoza, appearing in propia persona, filed a verified crosscomplaint against Candelaria, Macareno, Hopevale, and other business entities allegedly 

owned by Macareno. Valencia also filed a cross-complaint against Mendoza, alleging 

breach of contract. Valencia amended his cross-complaint to add a fraud count against 

Mendoza, and later amended it again to add a claim against Candelaria to establish and 

enforce an equitable mortgage against the Sandringham Court home. 

The clerk entered default against Mendoza at Valencia’s request on November 19, 

2012. The trial court dismissed Mendoza’s cross-complaint in its entirety without 
8

prejudice on February 21, 2013, after he failed to appear “for the second consecutive 

appearance.” Candelaria and Valencia proceeded to a two-day bench trial on the 

remaining claims and cross-claims on February 26, 2013. The court asked the parties to 

focus their closing arguments on “specifically what are you requesting in regards to 

damages.” 

Candelaria clarified that she sought: (1) to quiet title to the Sandringham Court 

home “against the Mendoza Grant Deed . . . as of June 21, 2011, and that the Deed be 

declared void”; (2) to quiet title to the Sandringham Court home “against the Valencia 

Deed . . . as of June 21, 2011, and that the Deed of Trust be declared void and set aside”; 

(3) declarations that she is the sole owner of the Sandringham Court home and that all 

other liens on the home are invalid; and, “if Mr. Valencia prevails” or “if the court finds 

against the plaintiff on the quiet title,” (4) damages of $160,000 against Mendoza. 

Candelaria explained that her alternative request for damages was intended to “guard[ ] 

against the reality that the court may grant Mr. Valencia relief under his cross-complaint 

on some theory in which case we want a money damage back against him,” and clarified 

that no damages would be necessary if she prevailed on the quiet title counts “because 

then she won’t be damaged.” 

Valencia explained that the relief he sought was “an enforceable right of one half 

interest in the property through a foreclosure proceeding.” He also informed the court 

that he wanted “a judgment against Mendoza for fraud for the $160,000 that he 

misrepresented.” 

The parties did not request a statement of decision from the trial court. (See Code 

Civ. Proc., § 632.) The trial court accordingly provided the parties only with a two-page 

order outlining its decision. 

In that March 6, 2013, order, the trial court found “that the key perpetrator in this 

matter is Daniel Mendoza based on his fraud and deceit of the plaintiff and the crosscomplainant.” The trial court “also [found] that the plaintiff/cross-defendant, Margie 

Candelaria, as well as the defendant/cross-complainant, Leonel Valencia, are both 
9

partially responsible for the subject dispute.” “[B]ecause it is analytically the most 

logical to do so,” the trial court addressed Valencia’s cross-claims first. The court 

proceeded to explain that it found for Valencia and against Mendoza on Valencia’s first 

three causes of action, and awarded him total damages of $120,000. The court also found 

for Valencia and against Candelaria on his equitable mortgage claim, in the amount of 

$40,000. The court stated that “Valencia can perfect his lien against the subject 

Sandringham property as lien holder, holding a second Deed of Trust, in the amount of 

$40,000.” On Candelaria’s claims, the court found for Candelaria and against Mendoza 

and Valencia. Specifically, the court awarded Candelaria $40,000 in damages against 

Mendoza, and quiet title as to both Mendoza and Valencia on the condition that 

Candelaria “first pays the $40,000 to cross-complainant Valencia (as per the Judgment on 

the cross-complaint).” The court further awarded Candelaria the declaratory relief she 

requested, also on the condition that Candelaria pay $40,000 to Valencia. The court 

ordered the parties to meet and confer to prepare a proposed judgment “consistent with, 

and reflective of,” its order. 

The parties were unable to agree on a proposed judgment. Eventually, Valencia 

filed a motion to enter judgment and attached a draft proposed judgment for the court’s 

signature. In Candelaria’s brief opposing the motion, she called the court’s attention to 

Civil Code, section 3543,3a maxim of jurisprudence that provides, “Where one of two 

innocent persons must suffer by the act of a third, he, by whose negligence it happened, 

must be the sufferer.” She argued that, in accordance with section 3543, Valencia “is 

estopped and barred by his agreeing to loan Mendoza $137,000 . . . without any security, 

and he cannot recover from Candelaria, an innocent party who was also deceived by 

Mendoza, because the loss must be borne by Valencia whose negligence or misplaced 

confidence enabled the injury to occur.” Candelaria further disputed the trial court’s 

 

3 All further statutory references are to the Civil Code unless otherwise indicated. 
10

conclusion that Valencia was entitled to receive a second deed of trust on the 

Sandringham Court property and “recover a $40,000 portion of his loss caused by his 

trust in Mendoza from Candelaria.” Valencia responded that the “facts do not support 

her position,” in that Candelaria was negligent by signing the grant deed giving Mendoza 

a one-half interest in the Sandringham Court home. He further contended that he acted in 

good faith and accordingly should be considered a “bona fide purchaser or 

encumbrancer.” 

The trial court held a hearing on Valencia’s motion for entry of judgment on 

September 16, 2013. Candelaria did not attend the hearing4, and we have been provided 

only with the resultant motion ruling and judgment, no transcript. The trial court granted 

in part and denied in part Valencia’s motion and entered the following judgment, 

consistent with its earlier order:

“1. Judgment for Plaintiff Margie M. Candelaria on her complaint as against 

Defendant Daniel A. Mendoza, and Plaintiff Margie M. Candelaria shall have and 

recover from Defendant Daniel A. Mendoza the amount of Forty Thousand dollars 

($40,000.00), and costs of suit pursuant to a timely filed Memorandum of Costs. The 

Court quiets title as of June 21, 2011 in favor of Plaintiff Margie M. Candelaria on the 

real property commonly known as 18223 Sandringham Court, Los Angeles, California, 

91326 . . . (hereinafter ‘Property’) against the Grant Deed recorded on June 22, 2011. . . 

in favor of Defendant Daniel A. Mendoza, and that Grand [sic] Deed is declared void;

“2. Judgment for Plaintiff Margie M. Candelaria on her complaint as against 

Defendant Leonel Valencia, in that the Court quiets title on the property as of June 21, 

2011 against the Short Form Deed of Trust and Assignment of Rents recorded on July 19, 

2011 . . . in favor of Leonel Valencia, and that Short Form of Deed of Trust And 

 

4

The record indicates that Candelaria’s attorney had to attend to another matter 

before a different court, and the attorney he enlisted to cover the hearing unexpectedly 

fell ill, slept through his alarm clock, and did not wake up until Candelaria’s attorney 

telephoned him to ask where he was. 
11

Assignment of Rents is declared void. Otherwise, the Plaintiff Margie M. Candelaria is 

to recover no money against Defendant Leonel Valencia;

“3. Judgment for Cross-Complainant Leonel Valencia on his Second Amended 

Cross-Complaint as against Defendant Daniel A. Mendoza in the amount of One 

Hundred and Twenty Thousand dollars ($120,000.00) and costs of suit pursuant to a 

timely filed Memorandum of Costs; and 

“4. The Court further grants Judgment on the Cross-Complaint of Leonel 

Valencia and against Margie M. Candelaria on the Fourth Cause of Action to ‘Establish 

and Enforce Equitable Mortgage’ in the amount of $40,000.00 and to perfect his lien 

against the subject property as a lien holder, holding a Second Deed of Trust, in the 

amount of $40,000.00. 

“Once the Plaintiff/Cross-Defendant Margie M. Candelaria first pays the 

$40,000.00 to Cross-Complainant Leonel Valencia (as per the Judgment on the CrossComplaint), the Court then declares as follows:

“a. Court quiets title on the Property against the Mendoza Grant Deed as 

of June 21, 2011, and that Deed will be declared void;

“b. Court quiets title on the Property against the Valencia Deed of Trust 

recorded July 19, 2011 . . . , and that Second Deed of Trust will then be declared void and 

set aside;

“c. Candelaria is the sole owner of the Sandringham property, and the 

Mendoza Grant Deed is set aside and is not a lien against Sandringham property; and 

“d. The Valencia Deed is not a valid lien on the Sandringham property 

and is to be set aside.”

Candelaria timely filed a notice of appeal on November 14, 2013. She requests 

that we “modify the Judgment by striking that portion that awards Valencia a second 

deed of trust for $40,000, and in all other respects affirm the Judgment.” 
12

DISCUSSION

A. Standard of Review

As a general rule, “[t]he substantial evidence standard of review is applicable to 

appeals from both jury and nonjury trials.” (Jameson v. Five Feet Restaurant, Inc. (2003) 

107 Cal.App.4th 138, 143.) Under that standard, “we resolve any conflict in the evidence 

and reasonable inferences to be drawn from the facts in support of the determination of 

the trial court.” (Citizens Business Bank v. Gevorgian (2013) 218 Cal.App.4th 602, 613.) 

Where, as here, no statement of decision is requested or rendered, we “imply all findings 

necessary to support the judgment, so long as those findings are supported by substantial 

evidence.” (McLaughlin v. Walnut Properties, Inc. (2004) 119 Cal.App.4th 293, 302.)

The portion of the judgment that Candelaria challenges, however, is the trial 

court’s award to Valencia of a $40,000 equitable mortgage in the Sandringham Court 

property. “An equitable decree is reviewed under the abuse of discretion standard, under 

which ‘we resolve all evidentiary conflicts in favor of the judgment and determine 

whether the court’s decision “‘falls within the permissible range of options set by the 

legal criteria.’”’” (In re Estates of Collins & Flowers (2012) 205 Cal.App.4th 1238, 

1246; see also Tampico v. Wood (1963) 222 Cal.App.2d 211, 215 (Tampico); cf. 

Scottsdale Insurance Co. v. Century Surety Co. (2010) 182 Cal.App.4th 1023, 1032-1033 

[court’s allocation of liability in equitable contribution action reviewed for abuse of 

discretion].) Trial courts sitting in equity have broad discretion to fashion relief (In re 

Estates of Collins & Flowers, supra, 205 Cal.App.4th at p. 1246), and an abuse of 

discretion occurs only when, “in light of applicable law and considering all relevant 

circumstances, the court’s ruling exceeds the bounds of reason.” (Jhaveri v. Teitelbaum

(2009) 176 Cal.App.4th 740, 749.) 

Both parties assert that the substantial evidence standard of review should be 

applied here. To the extent that Candelaria is challenging the trial court’s apparent
13

rejection of her section 3543 argument,5 we agree. “Estoppel based upon Civil Code 

section 3543 is factually established and appellate review is limited to a determination of 

whether substantial evidence supports the finding: ‘Whether or not plaintiffs or 

defendants were negligent, . . . and whether or not section 3543 of the Civil Code is 

applicable, are [each] questions of fact.’” (Wurzl v. Holloway (1996) 46 Cal.App.4th 

1740, 1753-1754 [quoting Keegan v. Kaufman Bros. (1945) 68 Cal.App.2d 197, 200].) 

However, to the extent that she is challenging the trial court’s decision to grant an 

equitable mortgage or the court’s exercise of its equitable discretion in fashioning a 

remedy, we apply the abuse of discretion standard. 

B. Analysis

The main “premise of Candelaria’s appeal” is that section 3543 requires 

modification–really, reversal–of the trial court’s judgment that Valencia is entitled to a 

$40,000 second deed of trust on the Sandringham Court home. She argues that 

“[s]ubstantial evidence compels the conclusion that, as between Valencia and Candelaria, 

Valencia was principally responsible for causing his loss in November/December when 

he misplaced his confidence in Mendoza” by providing Mendoza with unsecured loans. 

Since her own conceded “negligence in deeding title to Sandringham to Mendoza and 

herself six months later was not a cause of, or factor in, Valencia’s loss,” Candelaria 

contends she should not bear any responsibility for rectifying that loss. 

We have described section 3543 as “basically an estoppel theory, addressing 

comparative fault between two innocent victims.” (Wurzl, supra, 46 Cal.App.4th at p. 

1752.) “It is based upon misplaced confidence by one victim resulting in victimization of 

the other.” (Ibid.) Here, the trial court expressly found that both Candelaria and 

Valencia were “partially responsible for the subject dispute.” Substantial evidence 

supports this finding. Candelaria took Mendoza’s representations at face value despite 

 

5 Without the benefit of a statement of decision or transcript of the hearing at which 

the motion to enter judgment was presented, we are not able to ascertain whether the trial 

court accepted, rejected, or even considered Candelaria’s arguments concerning section 

3543.
14

her knowledge that he had no interest in Hopevale and no longer lived with Macareno, 

failed to read the grant deed before signing it, and made no inquiry into the transaction 

beyond leaving a voicemail message for Macareno (and proceeding without receiving a 

call back). Valencia loaned $137,000 to Mendoza without confirming that Mendoza had 

an interest in Hopevale or the Alcove Avenue home, and without obtaining a security 

interest in any of Mendoza’s property. 

In other words, both Candelaria and Valencia erroneously placed their confidence 

in Mendoza. “Misplaced confidence has been held to be negligence within section 

3543.” (Reusche v. California Pacific Title Insurance Co. (1965) 231 Cal.App.2d 731, 

738 (Reusche).) Thus, both Candelaria and Valencia were negligent for purposes of 

section 3543, which provides guidance for situations in which “one of two innocent 

persons must suffer by the act of a third.” The trial court’s factual finding of mutual 

culpability distinguishes the instant case from those cited by Candelaria. For example, in 

Tampico, the court expressly noted that it did not appear from the record “that the 

[defendants] were in any way negligent in failing to discover” the fraud perpetrated on 

both plaintiffs and defendants. (Tampico, supra, 222 Cal.App.2d at p. 216.) Likewise, 

one of the parties in Reusche knowingly approved a forged check, while the other was 

entirely innocent. (See Reusche, supra, 231 Cal.App.2d at pp. 738-739; see also Wutzke 

v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 39 [“At the conclusion of 

trial, the court found both Wuzke and Reid were ‘innocent parties’ and that neither had 

been negligent in their dealings with the Millers.”].)

Candelaria argues that she nonetheless is comparatively innocent, as Valencia was 

the first to fall victim to Mendoza’s fraudulent ways and therefore “set in motion the 

chain of events resulting in his own loss when Mendoza’s representations regarding 

repayment from the sale of Alcove proved false.” This position has some support in the 

case law, as courts have invoked section 3543 as a basis for allocating loss to the party 

who “initiated the chain of events leading up to the loss,” or the one who vested in the 

wrongdoer the power to perpetrate a fraud. (Tampico, supra, 222 Cal.App.2d at p. 215.) 
15

We do not find it particularly persuasive here, however, as the trial court found that 

Candelaria was partially responsible. (Cf. In re Estates of Collins & Flowers, supra, 205 

Cal.App.4th at p. 1247 [noting that section 3543 and the unclean hands doctrine are 

“entwined theories”].) Both she and Valencia vested in wrongdoer Mendoza the power 

to perpetrate a fraud. Valencia’s and Candelaria’s independent negligence in dealing 

with Mendoza set in motion two separate chains of events that happened to intersect at 

Sandringham Court. To the extent that Candelaria may have been less negligent than 

Valencia, it appears that the trial court took this into account in fashioning the parties’ 

respective remedies. 

Though unconventional, the trial court’s judgment appears to be an attempt to 

“approach the status quo as nearly as possible” (Tampico, supra, 222 Cal.App.2d at p. 

215) while apportioning the loss in accordance with the parties’ respective negligence. 

We find the award to be a permissible exercise of the trial court’s discretion. When the 

dust settled on the convoluted facts of this case, Valencia was out $160,000, Candelaria

was out an interest in her property worth approximately $400,000, and Mendoza was out 

of the picture. The trial court’s award allows the more culpable Valencia to recover only

one quarter of his loss immediately and requires him to seek the sizeable remainder from 

Mendoza, who may never be found and may well be judgment-proof if he is. Candelaria, 

on the other hand, must immediately suffer the pain of transferring $40,000 to Valencia, 

but this amounts to only 10 percent of her loss–and she has been awarded a judgment in 

that very amount against Mendoza, an offset that she proposed during closing argument. 

Moreover, she is certain to receive all of the nonmonetary relief she requested. In the 

end, she will be much closer to the status quo than Valencia, though both will be made 

entirely whole if they are able to collect their judgments against Mendoza. Although we 

may have crafted the parties’ awards differently, the trial court’s judgment is not outside 

the bounds of reason, given the unusual circumstances of this complicated case.

The same is true of the court’s decision to grant Valencia a temporary equitable 

mortgage in the Sandringham Court property. “In general, equity will create a lien on 
16

property where this is necessary to accomplish substantial justice and protect creditors.” 

(Grappo v. Coventry Financial Corp. (1991) 235 Cal.App.3d 496, 509.) Here, the court 

acted within its discretion in concluding that substantial justice would be served by the 

imposition of a small and temporary equitable lien on the Sandringham Court property. 

Valencia had little reason to doubt the validity of Mendoza’s interest in the Sandringham 

Court home, which was evidenced by a notarized and recorded grant deed. Valencia 

plainly intended to “make real property security for an obligation” (ibid.), which is one of 

the several typical situations in which courts often construe equitable liens, and the lien 

here is well within the interest that Candelaria negligently deeded to Mendoza. 

Candelaria is not “burdened further with a judicially constructed lien” the burden her own 

negligence placed on the property is considerably reduced and will be eliminated 

completely if Mendoza is located. 

DISPOSITION

The judgment is affirmed. Respondent is awarded costs on appeal. 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

COLLINS, J.

We concur:

EPSTEIN, P. J.

MANELLA, J.