Court Opinion

ID: 952851
Source: CourtListenerOpinion
Date Created: 2013-06-28 23:21:59.52881+00
Date Added: 2024-06-11T09:12:27.516312
License: Public Domain

Filed 6/28/13 W/F Investment Corp. v. Neal CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

W/F INVESTMENT CORP.,

   Plaintiff, Cross-defendant and                                      G046882
Appellant,
                                                                       (Super. Ct. No. 30-2010-00355681)
         v.
                                                                       OPINION
CHARLES F. NEAL et al.,

   Defendants, Cross-complainants and
Respondents;

MORTGAGE ELECTRONIC
REGISTRATION SYSTEM INC., et al.,

     Defendants and Respondents.

                   Appeal from a judgment and postjudgment order of the Superior Court of
Orange County, Linda S. Marks, Judge. Affirmed.
              Aires Law Firm, Timothy Carl Aires for Plaintiff, Cross-complainant and
Appellant.
              Songstad Randall Coffee & Humphrey, L. Allan Songstad Jr., and Garret R.
Rogers for Defendants, Cross-complainants and Respondents Charles F. Neal, Sharon K.
Peile, Bank of America N.A., and Defendant and Respondent Mortgage Electronic
Registration System Inc.
              No appearance by Defendant and Respondent First American Title
Company.

                                   *           *           *

              Plaintiff W/F Investment Corp. seeks a declaration that its judgment debtor
has an interest in a residential property, which plaintiff intends to use to satisfy the debt.
The judgment debtor held legal title to the residence until 25 years ago when he
transferred his interest to his mother. In 1991 a court determined that transfer was
fraudulent as to a creditor unrelated to this suit and “set aside” the transfer. In this appeal
we must interpret the 1991 judgment to determine whether the court “set aside” the
transfer for all purposes such that legal title reverted to the judgment debtor, or whether it
was set aside only to the extent necessary to satisfy the prior creditor‟s claim. The trial
court held it was only set aside in the more limited sense, which results in plaintiff in this
case having no claim on the residence. We affirm.

                                           FACTS

              In 1987 Russell Diehl and his wife, Diane G. Diehl, transferred their
interest in a residence to Diehl‟s mother the day after suffering a judgment for $37,500 in

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favor of William F. Quirk, Jr. Diehl‟s mother subsequently reconveyed the property to
Diehl and his wife. In 1988 Diehl was served with an order to appear for a judgment-
debtor exam, and within days Diehl and his wife again conveyed the residence to Diehl‟s
mother. Quirk subsequently filed a complaint “To Set Aside a Fraudulent Conveyance”
against Diehl‟s mother. The complaint prayed for a judgment “[t]hat said fraudulent
conveyance be set aside to the extent necessary to satisfy plaintiff‟s claim.” The trial
court found that Diehl had transferred the residence with the intent to defraud Quirk, his
creditor (Diehl‟s mother, on the other hand, did not have fraudulent intent). Accordingly,
the court entered judgment, stating the transfer “having been found to have been made
with the actual intent to defraud plaintiff, is hereby declared to be set aside” (we refer to
this as the “set-aside judgment”). The judgment was recorded in 1991.
              In 1993 Diehl suffered an unrelated judgment in favor of Westerly
Corporation. That judgment was renewed in 2003 in the amount of $848,820.36. An
abstract of judgment was recorded in 2004. The judgment was assigned to plaintiff,
which is the basis of plaintiff‟s claim here.
              Between 1989 and 2007 there were a series of transfers of the residence
among Diehl‟s family members, none of which involved Diehl himself. The last of these
transfers resulted in Diehl‟s wife holding legal title as her sole and separate property.
              In 2009 Diehl‟s wife sold the residence to defendant Charles F. Neal.
Neal‟s purchase was financed in part by a loan from defendant Bank of America, N.A.
              In 2010 plaintiff filed suit against, as relevant here, Neal, Neal‟s wife, Bank
of America, and Mortgage Electronic Registration Systems Inc. (a beneficiary of the deed
of trust in favor of Bank of America). The complaint seeks a declaration that Diehl has
an interest in the residence upon which plaintiff could execute.

1
              Quirk is not a party to this suit.

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              Prior to trial, the court bifurcated the proceeding. The first issue to be tried
was whether the 1991 set-aside judgment completely nullified the 1987 and 1988
transfers such that title was restored to Diehl. Plaintiff contended it did and that none of
the subsequent transfers purported to transfer Diehl‟s interests. The result, plaintiff
claimed, was that Diehl still maintained an interest in the residence, which was available
to satisfy plaintiff‟s judgment.
              After hearing phase one of the trial, the court disagreed: “The Court rules
that an avoidance judgment in the unrelated case 579724 Quirk vs. Diehl did not restore
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title to Russell Diehl, defendant in the present action. The avoidance action only set
aside the 1987 and 1988 conveyances for the limited purpose of permitting the plaintiff
creditor Quirk to enforce his judgment. Defendant Russell Diehl transferred all of his
interest in the real property more than 5 years prior to Plaintiff W/F Investment Corp.
obtaining its judgment or recording its abstract.” (Footnote added.)
              The second issue to be tried was whether, despite not holding record title to
the residence, Diehl maintained an equitable interest in the residence. Plaintiff claimed
Diehl maintained an equitable interest as evidenced by a 2007 deed transferring the
residence among Diehl‟s family members. That deed was from “Diane G. Diehl and
Russell Reed Diehl III, wife and husband and Reed Kyle Diehl, a single man, all as joint
tenants” (italics added) to Diane G. Diehl as her sole and separate property. It was
undisputed that the reference to “wife and husband” in this deed was erroneous — Diane
G. Diehl‟s is Diehl‟s wife, but Russell Reed Diehl III is Diehl‟s son. Nonetheless,
plaintiff claimed this reference to “wife and husband” was the “shark‟s fin” that revealed
to the world Diehl‟s hidden equitable interest. There was no testimony from any of the
Diehls.

2
             At this point Diehl was a defendant in the action. Plaintiff later voluntarily
dismissed Diehl.

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              The court held there was insufficient evidence to show Diehl held an
equitable interest: “Civil Code section 679 gave absolute ownership of the property to
[Diehl‟s wife]. She held the property at the time of transfer in 2009 as her „sole and
separate property.‟ Further, pursuant to Evidence Code section 662, the owner of legal
title to property is presumed to be the owner of the full beneficial interest. There was no
beneficial or equitable interest held in the name of Russell Diehl which existed in 2007.
Further the evidence to support such a notion would have to be „clear and convincing
evidence,‟ and there is no competent evidence this court could rely upon to reach such a
conclusion. There is no merit to the argument that [Diehl‟s wife] was holding a
beneficial interest for [Diehl] for the past 20 years.”
              The court entered judgment in favor of defendants. Plaintiff filed a motion
to set aside the judgment and enter a new judgment (Code Civ. Proc., § 663) and a
motion for new trial, raising the same legal issues raised in this appeal. The court denied
both. Plaintiff timely appealed from the judgment and postjudgment order.

                                        DISCUSSION

              The first issue we address is whether the set-aside judgment reverted title to
the residence to Diehl. This requires us to interpret the set-aside judgment. As the
evidence concerning the interpretation of the judgment is undisputed, and as the
interpretation of a written instrument is generally a question of law, our review is de
novo. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799; Parsons v. Bristol Develop. Co.
(1965) 62 Cal.2d 861, 865-866.)
              “The rules for interpreting judgments are well settled . . . . [Citation.]
. . . [T]he „same rules apply in ascertaining the meaning of a court order or judgment as in
ascertaining the meaning of any other writing.‟ [Citation.] The general rule is that „The
language of a . . . [writing] is to govern its interpretation, if the language is clear and

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explicit, and does not involve an absurdity.‟ [Citation.] There are exceptions. „The
terms of a writing are presumed to have been used in their primary and general
acceptation, but evidence is nevertheless admissible that they have a local, technical, or
otherwise peculiar signification, and were so used and understood in the particular
instance, in which case the . . . [writing] must be construed accordingly.‟ [Citation.]
Where an ambiguity exists, „The rule with respect to orders and judgments is that the
entire record may be examined to determine their scope and effect. . . .‟” (Estate of
Careaga (1964) 61 Cal.2d 471, 475.) The statement of decision may be considered in
construing the judgment. (Sutphin v. Speik (1940) 15 Cal.2d 195, 201 [“The suggestion
made by defendant that the „judgment alone should be considered and the findings
disregarded if outside the scope of the judgment‟ can have no force in view of the settled
rule that the findings constitute the decision of the court”].)
              Plaintiff contends the term “set aside” means to void or annul, citing
various dictionaries. Plaintiff further contends the set-aside judgment is clear on its face
and that resort to materials outside the four corners of the judgment is improper. Plaintiff
then concludes the set-aside judgment plainly voided the 1987 and 1988 transfers, with
the result that legal title to the property reverted back to Diehl. And since no subsequent
deed purported to transfer Diehl‟s interest, plaintiff concludes Diehl‟s interest is still
available for execution.
              Plaintiff‟s plain reading of the judgment has some surface appeal. In a
vacuum, we might agree the term “set aside” means to void or nullify something. In
context, however, we conclude the term “set aside” is ambiguous, and we ultimately
conclude the court did not nullify the 1987 and 1988 transfers.
              The ambiguity stems from the historical and legal context of the judgment.
This was a judgment in a fraudulent conveyance action. Historically in such cases, courts
were authorized to avoid a transfer only to the extent necessary to satisfy a creditor‟s
claim. In Heffernan v. Bennett & Armour (1952) 110 Cal.App.2d 564, for example, the

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trial court held that title to certain fraudulently transferred assets remained with the
transferor and never passed to the transferee, but the Court of Appeal reversed. It
reasoned, “The first error in this line of reasoning is the assumption that title did not pass
to [the transferee]. Title did pass, subject to attack only by members of the protected
class, each of whom must pursue the property in a timely and appropriate manner,
successfully to subject it to his claim. A transfer in fraud of creditors is valid as to the
grantor and all persons claiming under him, „and as to all persons except creditors of the
grantor who may question it in a proper proceeding.‟” (Id. at 585.) As another court
stated the rule, “„No rule of law is more firmly established than that a transfer of property
made in fraud of creditors, while void as to them, is binding upon the parties and those in
privity with them. The statutes against fraudulent conveyances are designed merely to
protect the interests of creditors, and their provisions do not in any manner affect the
rights of the parties to the conveyance, and these must therefore be determined by the
principles of the common law.‟” (Ramirez v. Hartford Acc. & Indem. Co. (1938) 29
Cal.App.2d 193, 196-197.)
              As plaintiff points out, these cases were decided prior to the enactment of
the Uniform Fraudulent Transfer Act (UFTA) (Civ. Code, § 3439 et seq.), upon which
the set-aside judgment is based. Consistent with the cases cited above, the UFTA
provides as a remedy, “Avoidance of the transfer or obligation to the extent necessary to
satisfy the creditor‟s claim.” (Civil Code § 3439.07, subd. (a)(1).) Plaintiff contends,
however, that under the UFTA courts are empowered to go beyond that remedy based on
section 3439.07, subdivision (a)(3)(C). That subdivision permits the court to order,
“[s]ubject to applicable principles of equity and in accordance with applicable rules of
civil procedure” “[a]ny other relief the circumstances may require.”
              The parties debate whether this catch-all remedy permits a court to go
beyond the express statutory remedy of avoiding a transfer “to the extent necessary to
satisfy the creditor‟s claim.” We need not decide that issue, however. We will assume,

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without deciding, that under appropriate circumstances a court could nullify a deed for all
purposes. The question to be answered here is: Did the court do so in the set-aside
judgment?
              The answer to that question is not immediately clear. The term “set aside”
is not found in the remedies authorized under the UFTA, and the history of fraudulent
transfer remedies described above suggests the possibility that the court intended the
ordinary remedy but simply used loose language. Given this ambiguity, contrary to
plaintiff‟s claim, the trial court properly looked to the statement of decision and the
underlying complaint to interpret the set-aside judgment.
              The statement of decision underlying the set-aside judgment is notable for
what it does not discuss: it does not discuss any intent to issue an extraordinary remedy.
It cites no authority for issuing such a remedy, nor is any rationale for such a remedy
discussed. Rather, the statement of decision reveals the underlying case to be a vanilla
fraudulent transfer case: Diehl suffered a judgment, and the next day, unbeknownst to his
mother, he recorded a deed transferring the residence to her. The court specifically found
the mother did not participate in the fraud. (Cf. Ahmanson Bank & Trust Co. v. Tepper
(1969) 269 Cal.App.2d 333, 344 [where transferee participated in the fraud, transfer was
voided].) In short, there is no indication the court intended to grant extraordinary relief,
nor that the circumstances warranted extraordinary relief.
              Further, the complaint sought the traditional, limited relief from a
fraudulent transfer: that the fraudulent conveyance be set aside “to the extent necessary
to satisfy plaintiff‟s claim.” The fact that plaintiff prayed for limited relief tends to
corroborate our inferences from the statement of decision that the court intended the
ordinary remedy of avoiding the transfer for limited purposes. We also note the
complaint is titled “Complaint (To Set Aside a Fraudulent Conveyance)”, which may
explain where the court picked up the “set aside” language.

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               The historical and statutory context, combined with the statement of
decision and complaint, lead us to conclude the trial court properly interpreted the set-
aside judgment as avoiding the 1987 and 1988 transfers for the limited purpose of
satisfying the claim of the creditor in that action. Consequently, the set-aside judgment
did not revert legal title to Diehl.

The Court Correctly Ruled Diehl Did Not Have an Equitable Interest
               Plaintiff contends next that, even if Diehl holds no legal title, he maintained
an equitable interest in the residence. Plaintiff‟s argument rests wholly on the 2007 deed
transferring the residence from “Diane G. Diehl and Russell Reed Diehl III, wife and
husband, Reed Kyle Diehl, a single man, all as joint tenants” to “Diane G. Diehl a
married woman as her sole and separate property.” It was undisputed at trial that Russell
Reed Diehl III is not Diane Diehl‟s husband, but instead her son, and that the reference to
“wife and husband” was erroneous. Undeterred, plaintiff claims, “The execution of the
2007 Grand Deed [sic] by the hand of Diane G. Diehl conclusively establishes that
Russell R. Diehl, had at that moment an equitable interest in [the residence]; no other
evidence on this issue was needed or even admissible.”
               Plaintiff‟s argument is obscure, but we divine two distinct arguments from
plaintiff‟s various comments.
               First, plaintiff seems to contend the 2007 deed evidences a resulting trust in
which Diehl‟s wife held title for Diehl. “„A resulting trust arises by operation of law
from a transfer of property under circumstances showing that the transferee was not
intended to take the beneficial interest. [Citations.] Such a resulting trust carries out and
enforces the inferred intent of the parties.” (Fidelity National Title Ins. Co. v. Schroeder
(2009) 179 Cal.App.4th 834, 847.) “[O]ne who claims a resulting trust in property has
the burden of proving the facts establishing his [or her] beneficial interest by clear and
convincing evidence.” (Gomez v. Cecena (1940) 15 Cal.2d 363, 366-367; see Evid.

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Code, § 662 [“The owner of the legal title to property is presumed to be the owner of the
full beneficial title. This presumption may be rebutted only by clear and convincing
proof”].)
                    Here, the evidence fully supports the trial court finding no evidence of a
resulting trust. There was no evidence that in 1987 and 1988, when Diehl transferred his
interest to his mother, he or any other party to the transaction intended Diehl to maintain
an equitable interest. None of the Diehls testified, and there was no other evidence
concerning the parties‟ intent. It was undisputed that the reference in the 2007 deed to
“wife and husband” was erroneous. Plaintiff claims the error somehow evidences the
parties‟ intent — 20 years in the past — to create a resulting trust. We are at a loss to
follow plaintiff‟s logic.
                    The other argument plaintiff makes is that, under Evidence Code section
622, the erroneous recitation in the 2007 deed that Diane Diehl and Russell Diehl III are
“wife and husband” creates a conclusive presumption that Diehl maintained an equitable
interest. Evidence Code section 622 states, “The facts recited in a written instrument are
conclusively presumed to be true as between the parties thereto, or their successors in
interest . . . .”
                    The logic of plaintiff‟s argument is flawed, however. If we were to
straightforwardly apply section 622 here, we would conclude (absurdly) that mother and
son are actually husband and wife. But that would not establish that Diehl has an interest
in the residence. Thus, section 622 is no help to plaintiff. Accordingly, Diehl does not
                                3
hold an equitable interest.

3
               Another argument plaintiff advances, the logic of which evades us, is that
because a fraudulent conveyance action affects title to real property, the set-aside
judgment nullified the 1987 and 1988 transfers. Plaintiff spends four pages of its brief
citing out-of-state cases holding that a fraudulent conveyance action affects title to real
property, and thus it is appropriate to file a lis pendens. We agree that a lis pendens is
appropriate in connection with a fraudulent conveyance action; California law is already

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The Court Committed No Reversible Evidentiary Error
              Plaintiff contends the court made several reversible evidentiary errors. We
disagree.
              First, in phase two of the trial, the court excluded exhibit 18, which is the
lis pendens filed in connection with the set-aside judgment. Phase two concerned only
whether Diehl maintained an equitable interest in the property. The lis pendens had no
bearing on the intent of the parties to the 1987 and 1988 transfers and was properly
excluded as irrelevant.
              Next, exhibits 69, 80, 94, and 98 were various documents related to the title
company report and escrow instructions pertaining to the Neals‟ purchase of the
residence. Plaintiff offered them to show the Neals‟ escrow officer was on notice of the
set-aside judgment. The trial court excluded them in phase two of the trial as irrelevant.
We agree; whether the escrow agent was on notice of the set-aside judgment in 2009 is
irrelevant to whether Diehl preserved an equitable interest in the residence in 1987 and
1988.
              Exhibit 131 was a completely unrelated judgment that underlay the decision
in Reddy v. Gonzales (1992) 8 Cal.App.4th 118. The judgment was offered to help the
trial court interpret the published appellate decision. The court properly excluded it. The
judgment itself is not binding, and the published appellate decision stands on its own.
Further, plaintiff has not explained how excluding the judgment was harmful, and thus
even if we found error we would not reverse.
              Finally, plaintiff argues exhibit 104 was improperly admitted. Exhibit 104
was the Neals‟ receipt of a preliminary title report. It was offered by defendants in phase

settled on that point. (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 649.) It does not
follow, however, that every fraudulent conveyance judgment nullifies the transfers in
question entirely. Assuming such a remedy is available at all, we would have to
determine from the language of the judgment whether the court ordered such a remedy.
As set forth above, the set-aside judgment did not.

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two to show the Neals were unaware of any cloud on title to the residence. We agree
with plaintiff it was irrelevant to whether Diehl maintained an equitable interest in the
residence. Nonetheless, plaintiff has offered no explanation for how such an error
impacted the court‟s holding in phase two. We see no indication the court relied on it at
all. Accordingly, the error was harmless.

                                      DISPOSITION

              The judgment is affirmed. Defendants shall recover their costs incurred on
appeal.

                                                  IKOLA, J.

WE CONCUR:

O‟LEARY, P. J.

BEDSWORTH, J.

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