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Filed 6/9/15 Wells Fargo Bank v. Golding 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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). T his opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

WELLS FARGO BANK, N.A., Plaintiff and Appellant,

v. DAN E GOLDING et al., Defendants and Respondents. E059892 (Super.Ct.No. RIC1117215)
OPINION

APPEAL from the Superior Court of Riverside County. Dallas Holmes, Judge. (Retired j udge of the Riverside Super . Ct. assigned by the Chief Justice pursu ant to

art. VI, § 6 of the Cal. Const.) Affirmed. Drew M. Taylor for Plaintiff and Appellant. Law Offices of Peter J. Crosby and Peter J. Crosb y for Defendants and Respondents.2 INTRODUCTION Wells Fargo Bank, N.A., (Wells Fargo) appeals from a judgm ent in favor of defendants Dane and Michelle Golding following the sustaining of their demurrer to Wells Fargo’s second amended complaint without leave to amend. Wells Fargo contends (1) it adequately stated its causes of action for quiet title and declara tory relief; (2) its complaint was not barred by th e statute of limitations; and (3) it can amend its complaint to state a cause of ac tion for equitable lien. We find no error, and we affirm.

FACTS AND PROCEDURAL BACKGROUND We set forth the underlying facts con sistent with the standard that governs our review of a judgment of dismissal entered upon the sustaining of a demurrer: “[W]e assume the truth of all facts properly pleaded by the plaintiff, and those that may be inferred therefrom, as well as relevant fa cts appearing in exhibits attached to the complaint; we may also consider matters subject to judicial notice.” ( Van Horn v. Department of Toxic Substances Control (2014) 231 Cal.App.4th 1287, 1292.) In October 2011, Wells Fargo filed a verified complaint against Dane A. Golding,
Michelle E. Golding and Harvey D. Golding for quiet title and declaratory relief. 1 Wells Fargo alleged that in August 2007, Harvey acquired real proper ty in Canyon Lake , California, from his wife, Alba Nuvia Golding , as his sole a nd separate property. Wells

1 Harvey Golding died in 2013. Because defendants share a common last name, we will refer to them herein by their first names for clarity and convenience, and not intending any disrespect.3

Fargo’s predecessor in interest, World Savings Bank , FAB, (WSB) made a loan to Harvey in the amount of $227,500, secured by a deed of trust on the property. The deed of trust was recorded on September 12, 2007. In the deed of trust, Harvey stated,
“I promise that: (i) I lawfully own the Property; (ii) I have the right to grant and convey the Property to Trustee; and (iii) there are no outstanding claims, charges, liens or encumbrances against the Property, except for those wh ich are of public record

. ” (Italics added.) Wells Fargo alleged that the loan was to be secured by the entire property, but either through mistake or inadvertence, a grant deed was recorded against the property on September 11, 2007, conveying title from Harvey to Harvey, Michelle, and Dane. As a result, the loan was secured by only one

- third of the property. Wells Fargo attached to the complaint copies of (1) the interspousal grant deed, recorded on September 10, 2007, reflecting the conveyance from Alb a to Harvey; (2) the deed of trust; and (3) the grant deed recorded on September 11 , 2007

. On September 10, 2012, Dane and Michelle filed a demurrer to the initial complaint on the ground, among others, that Wells Fargo’s claims were barred under the appli cable three

- year statute of limita tions. On October 9 , 2012, Stanwich Mortgage Loan Trust, successor in interest to Wells Fargo via assignment dated October 3, 2012, filed a verified first amended complaint for quiet title and declaratory relief, adding th e allegation that “ Wells Fargo Bank became aware of the defect in its security interest in the Property on around June 10, 2010, after it initiated the foreclosure process on May 25, 2010.” The verified first amended complaint4

also alleged that Dane and M ichelle, “in the weeks prior to the Loan, had agreed to allow Harvey . . . to get a $200,000 loan, and secure it with the entire Property. For reasons
unknown . . . H arvey . . . instead received the $227,500 Loan, and , because of the mistake described abo ve, it is not adequately secured.” On October 25, 2012, Dan e and Michelle filed a demurrer to the first amended complaint on the ground, among others, that the causes of action were facially barred by th e statute of limitations. The trial court sustained the demurrer with leave to amend.
O n January 4, 2013, a verified second amended complaint was filed . With respect

to the failure to discover the purported recording mistake, the complaint alleged, “WSB , Wells Fargo Bank’s and Stanwich’s predecessor in i nt erest, loan ed to Harvey Golding based upon his representation that he was the sole fee simple interest owner of the Property. In fact, prior to o btaining the Loan, Harvey Golding filled out a Uniform Loan Application under penalty of perjury in which he l isted himself as the sole prospective borrower. In addition, when Harvey Golding executed the deed of trust he was the sole fee simple interest owner. Even though WSB , Wells Fargo Bank’s and Stanwich’s predecessor in interest, reviewed a preliminary titl e report prior to funding the Loan, and even though the preliminary title report confirmed that Harvey Golding was the sole fee simple interest owner, a preliminary title report is not an abstract of title or even a representation of the state of title. A preliminary title report is an offer to issue a title policy pursuant to the terms stated in the preliminary report. Nevertheless, WSB, Wells Fargo Bank’s and Stanwich’s predecessor in interest, was unaware of any facts prior to the close of the loan tha t [Harvey] Golding had conveyed part of his interest to others.5

WSB, Wells Fargo Bank’s and Stanwich’s predecessor in interest, had no reason to obtain an abstract of title or take any action in which it would require any search of the Property’s title, u ntil the loan was in default , when it first discovered the September 11 Grant Deed. Only then did WSB, Wells Fargo Bank’s and Stanwich’s predecessor in interest, discover that [Harvey] Golding had conveyed part of his interest to others.” On April 22, 201 3, Dane and Michelle filed a demurrer to the second amended complaint, again on the ground that the statute of limitations had run, and indicating the complaint failed to allege facts sufficient to invoke the delayed discovery rule. On May 31, 2013, t he tr ial court took judicial notice of recorded do cuments regarding the property. The recorded documents showed that Harvey, then a widower, acquired the property by grant deed in December 1975. The grant deed was recorded on February 10, 1976. In January 19 76, Harvey transferred the property through a grant deed naming himself, Dane, and Michelle as joint tenants. That grant deed was also record ed on February 10, 1976. By a grant deed dated August 15, 2007, and executed on August 15 an d 21, 2007, Michelle a nd Dane (as joint tenants) and H arvey and Alba ( as trustees of T he Golding
F amily Living Trust dated February 2 8 , 2006 ) , transferred the property to Harvey , a married man as his sole and separate property. The grant deed was recorded on September 10, 2007

. On August 15, 2007, Alba executed an interspousal grant deed, granting Harvey the property as his sole and separate property. The interspousal grant deed was recorded on September 10, 2007.6

On August 15, 2007, Harvey granted a deed of trust to America homekey, Inc. , to secure a loan in the amount of $200,000. The deed of trust was re corded on September 10, 2007. The deed of trust identified the borrower as “ Harvey D. Golding, a married man as his sole and separate prope rty.” By a grant deed dated Augu st 20, 2007, and executed on August 21, 2007, Harvey transferred the property to himself, Michelle, and Dane as joint tenants. The grant deed was recorde d on September 11, 2007. The trial court declined to take judicial notice of a preliminary title repor t obtained by Wells Fargo’s predecessor in interest which indicated that title to the property as of May 9, 2007, was vested in “Michelle E. Golding, a Single Woman and Dane A. Golding, a Single Man, as Joint Tenants and Harvey D. Golding and A lba Nuvia
Go lding, Trustees of T he Golding Family Living Tru st dated February 28, 2006.” On August 15, 2013, t he trial court sustained the demurrer to the second amended complaint without leave to amend, and the judgment of dismissal was entered accordingly. Additiona l facts are set forth in the discussion of the issues to which they pertain.
DISCUSSION Statute of Limitations Wells Fargo contends the second amended complaint was not barred by the s tatute of limitations. To sustain a demurrer based on the statute of li mi tations, it must appear clearly and affirmatively from the dates alleged in the complaint that the statute has run. ( Roman7

v. County of Los Angeles (2000) 85 Cal.App.4th 316, 324.) Wells Fargo’s claims are subject to the three

- year statute of limitatio ns under Code of Civil Procedure section 338, subdivision (d), which applies to “[a]n action for relief on the ground of fraud or mistake.” (See Ankoanda v. Walker

- Smith (1996) 44 Cal.App.4th 610, 615 [“The law is clear that the theory of relief underlyin g an action for quiet title, in this case fraud or mistake, determines which statute of limitations applies ”]; Maguire v. Hibernia S. & L.
Soc. (1944 ) 23 Cal.2d 719, 734 [limitations period applicable to ordinary actions at law should be applied to action s for declaratory relief].) As noted a nte , Wells Fargo filed its initia l complaint in October 2011. The events on which it based its claims occurred in September 2007, nearly four years earlier. Wells Fargo argues, however, that under the delayed discove ry rule, its cause of action did not accrue until it discovered or should have discovered, through the exercise of reasonable diligence, all the facts essential to its cause of action. ( Leaf v. City of San Mateo (1980) 104 Cal.App.3d 398, 407.) To invoke the delayed discovery rule, the plaintiff must “specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” ( McKelvey v. Boeing North American , Inc

. (1999) 74 Cal.App.4th 151, 160, superseded by statute on another ground as stated in Grisham v. Philip Morris U

. S

. A

. , Inc

. (2007) 40 Cal.4th 623, 637 , fn .8.)8

Under the delayed discovery rule, “constructive and presumed notice or knowledge are equivalent to knowledge. So, when the plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowled ge from sources open to his or her investigation (such as public records or corporation books), the statute commences to run. ” (3 Witkin, Cal. Proc edure ( 5th ed. 2008) Actions, § 659, p. 870.) Another leading commentator has explained,

“ Constructive noti ce is not dependent upon whether a subsequent party actually searches the public records. A party may be a bona fide purchaser even though he or she has not personally searched the public records, or has had an agent or third party search the records. Th e fact that a subsequent purchaser or encumbrancer searches and evaluates the public record through an escrow or title agent does not diminish his or her right to rely on the record title and does not, by itself, impose a duty to investigate beyond the pub lic records unless it has actual, imputed, or implied notice from circumstances other than the record title. Conversely, a failure to search does not diminish the effect of the recorded instrument as imparting constructive notice to a person who lacks act ual, imputed or implied notice of the instrument.” (5 Miller & Starr , Cal. Real Estate (3d ed.
20 09 ) § 11.60 , p p . 11

- 197

— 11

- 198 , fns. omitted .) Here, it was undisputed that the grant deed conveying title to Harvey, Dane, and
M ichelle was recorded before W ells Fargo’s deed of trust. Civil Code section 1213 provides, in part, “Every conveyance of real property . . . acknowledged or proved and certified and recorded as prescribed by law from the time it is filed with the recorder for9

record is constructive n otice of the contents thereof to subsequent purchasers and mortgagees. ” Wells Fargo relies, however, on Prudential Home Mortgage Co

. v. Superior Court (1998) 66 Cal.App.4th 1236, 1247 ( Prudential ) for its statement that “we have found no case suggesting th e existence of public records precludes the application of the delayed discovery doctrine as a matter of law.” In Prudential , borrowers sued several lenders for violations of Civil Code section 2941, which requires a lender to record a reconveyance of a d eed of trust after the borrower p ays off a secured loan and provides a criminal penalty for a lender’s failure to do so. ( Id. at p. 1240.) A majority of the court held that the delayed discovery doctrine could apply because the plaintiffs were entitled t o presume the defendants had performed an act required by a penal statute. ( Id. at
pp. 1241, 1248.) Prudential is distinguishable because no such presumptio n applies in the present case. Here, the recorded documents of which the trial court took judicial notice show that when WSB made the loan to Harvey, record title was in Harvey, Michelle, and Dane , as joint tenants , because , at that time, neither the transfer deed from Michelle and Dane to Harvey nor the reconveyance deed from Harvey to himself, Michel le, and Dane had been recorded. A title search would thus have shown that the loan, made solely to Harvey, was undersecured, and under Civil Code section 1213, Wells Fargo’s predecessor in interest had constructive notice of that fact. Moreover, it appea rs that WSB’s escrow agent was aware of the series of transactions, and its knowledge was imputed to WSB. (See, e.g., In re Marriage of Clo ney (2001) 91 Cal.App.4th 429, 440.)10

We conclude Wells Fargo has failed to show that the discovery rule extend ed the statute of limitations. Possibility of Amending Complaint Wells Fargo contends it can amend its complaint to state a cause of action for equitable lien. This court reverses an order sustaining a demurrer without leave to amend if it determines there is a reasonable possibility the pleading can be cured by amendment. ( Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) Wells Fargo asserts that it can amend its complaint to allege a separate cause of action for an equitable lien in the amount o f $88,671.12, which represents the amount it paid to a prior encumbrancer on the property. Wells Fargo states that in 1998, Harvey and Alba obtained a $100,000 loan secured by a duly recorded deed of trust on the property. (Wells Fargo represents that th e 1998 deed was reflected on the preliminary title repor t, which Wells Fargo requested the trial court to judicially notice. As noted

a nte , the trial court declined to take judicial notice of that document.) Wells Fargo contends the 1998 deed of trust wa s paid off from the settlement proceeds of the loan made by Wells Fargo’s predecessor in interest. A reconveyance of the 1998 deed of trust
was recorded on September 21, 2007. “‘“One who advances money to pay off an encumbrance on realty at the instance

o f either the owner of the property or the holder of the incumbrance, either on the express understanding, or under circumstances from which an understanding will be implied, that the advance made is to be secured by a first lien on the property, is not a m ere volunteer; and in the event the new security is for any reason not a first lien on the property, the11

holder of such security, if not chargeable with culpable and inexcusable neglect, will be subrogated to the rights of the prior encumbrancer under the security held by him, unless the superior or equal equities of others would be prejudiced thereby, and to this end equity will set aside a cancellation of such security, and revive the same for his benefit.” [Citations]’ [Citations.] Equitable subrogati on thus gives effect to the intentions of the parties.” ( Branscomb v. JPMorgan Chase Bank N.A. (2014) 223 Cal.App.4th 801, 806.) Here, however, Wells Fargo does not assert that Michelle and Dane were parties to the 1998 deed of trust or that they pledged their two

- third joint interest in the property to secure the prior loan. Indeed, Wells Fargo does not assert that Michelle and Dane consented to or were aware of the prior loan. Harvey has since died. Upon the death of a joint tenant who has executed a trust deed on property without the knowledge or consent of the other joint tenants, the surviving joint tenants take the property free of the trust deed. ( Hamel v. Gootkin (1962) 202 Cal.App.2d 27, 28

- 30.) Thus, Wells Fargo has not shown that it could am end its complaint to state a valid cause of action.
DISPOSITION The judgment is affirmed. Costs are awarded to respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
McKINSTER Acting P. J. We concur:
MILLER J. CODRINGTON J.