Court Opinion

ID: 9889594
Source: CourtListenerOpinion
Date Created: 2023-10-10 19:10:09.731064+00
Date Added: 2024-06-11T12:49:19.401072
License: Public Domain

Filed 10/10/23 Premier Liberty Development v. Velocity Commercial Capital 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                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

 PREMIER LIBERTY DEVELOPMENT
 LLC,
                                                                       G061605
      Plaintiff and Respondent,
                                                                       (Super. Ct. No. 30-2018-01008782)
           v.
                                                                       OPINION
 VELOCITY COMMERCIAL CAPITAL
 LLC,

      Defendant and Appellant.

                   Appeal from a judgment of the Superior Court of Orange County, Randall
J. Sherman, Judge. Reversed.
                   Lanphere Law Group, Michael A. Lanphere and Louis A. Scotti; John L.
Dodd & Associates and John L. Dodd for Defendant and Appellant.
                   Law Office of Michael G. York, Michael G. York; and Susan D. Stein for
Plaintiff and Respondent.
                                             *               *               *
              According to the allegations in the complaint, plaintiff Premier Liberty
Development LLC (Premier) and defendant Velocity Commercial Capital LLC
(Velocity) are both victims of fraud. Both held a security interest in the same commercial
property. Premier held the earlier interest, having sold the property to the wrongdoers in
exchange for a note and deed of trust. The wrongdoers then forged a reconveyance of the
deed of trust, purportedly clearing title and taking the property in their own names. They
then obtained a loan from Velocity who also obtained a note and deed of trust, apparently
unaware of the fraud committed on Premier. This lawsuit is about whose security interest
prevails. Ruling on a summary judgment motion, the court found in favor of Premier and
declared its security interest more senior.
              We reverse. We do not reach the merits of this case because the present
lawsuit suffered a fatal procedural flaw from the outset: Premier filed another lawsuit a
year earlier against Velocity on the exact same facts, except that it sought money
damages rather than judicial foreclosure. The earlier lawsuit was still pending at the time
of the judgment. This represented an unlawful splitting of a single primary right into two
lawsuits. Velocity sought summary judgment on that ground, which the court
erroneously denied.

                                              FACTS
              In 2017, Premier filed a lawsuit against Velocity, several individuals
involved in the alleged fraud, and certain companies controlled by those individuals (the
2017 lawsuit). The 2017 lawsuit alleged the following facts: “Plaintiff was the owner of
an office building with the common address of 13902 Harbor Boulevard, Garden Gove,
California . . . . In March 2015, Plaintiff sold the Property to J. Phan and S. Nguyen, in
their individual capacities, for the sum of $2,150,000.00. . . . As part of the purchase
price, J. Phan and S. Nguyen executed a Note Secured by a Deed of Trust . . . for the
principal sum of $1,550,000.00, plus interest thereon.”

                                                2
                 “Beginning in late March 2017, Plaintiff learned, for the first time, the
following: [¶] (a) that on or about September 14, 2015, without Plaintiff’s written
consent, S. Nguyen executed a grant deed, recorded on September 18, 2015, conveying
title to the Property to Defendant FLG; Defendant J. Nguyen notarized S. Nguyen’s
signature . . . ; [¶] (b) that on or about March 16, 2016, without Plaintiff’s written
consent, J. Phan as ‘owner’ and on behalf of FLG, executed a grant deed, which was
recorded on March 18, 2016, conveying title to the Property to Defendant Kim
(S. Nguyen’s sister), as to undivided 66.66% undivided interest, and Defendant Chong, as
to 33.33% interest; this was done without an escrow and without title insurance;
Defendant J. Nguyen notarized J. Phan’s signature; . . . ; [¶] (c) on March 15, 2017, one
of the defendants forged the signature of Dr. Dang [(the managing member of Premier)]
as ‘beneficiary’ and ‘substituted trustee’ on a Substitution of Trustee and Full
Reconveyance . . . and recorded it on March 22, 1017 . . . . Defendant J. Nguyen
                                                                                 1
acknowledged, and purportedly witnessed, the signatures of Dr. Dang . . . .”
                 “[I]n furtherance of Defendants’ fraudulent scheme, and
contemporaneously with [the] fraudulent and forged [reconveyance], JVS obtained a loan
in the amount of $1,330,000.00 from Defendant Velocity and recorded a deed of trust on
March 17, 2017, encumbering the Property and perpetrating a fraud on Defendant
             2
Velocity.”
                 Premier asserted multiple causes of action sounding in fraud, notary
misconduct, and breach of contract against the individual defendants, but not against
Velocity. As to those causes of action, Premier sought money damages. Against
Velocity, the sole cause of action was “To Cancel Substitution of Trustee and Full
1
                 FLG refers to First Lending Group, a company allegedly controlled by the
wrongdoers.
2
              JVS refers to JVS Development, LLC, which is another company allegedly
controlled by the wrongdoers.

                                                3
Reconveyance,” in which Premier alleged that its security interest should “take priority
over and above any subsequently recorded instruments or documents including without
limitation the Velocity [deed of trust].”
              As a remedy, Premier sought the following: “For cancellation of that
certain Substitution of Trustee and Full Reconveyance recorded on March 22, [2017], as
instrument or document No. 2017000115166; that said instrument is void; and that that
certain Long Form Deed of Trust and Assignment of Rents dated March 25, 2015, and
recorded with the Orange County Recorder’s Office on March 31, 2015, as instrument or
document No. 20150001654460, is in full force and effect and has priority over and
above any and all other documents or instruments recorded thereafter.”
              In June 2018, Judge Frederick Horn denied a motion for summary
adjudication filed by Premier against Velocity. The court reasoned, “Velocity has raised
a triable issue of material fact regarding application of the doctrine of equitable estoppel.
‘It is settled that the doctrine of equitable estoppel ‘may be invoked by an innocent
purchaser, in spite of the fact that ordinarily a forged instrument cannot carry title. “The
owner of property cannot be divested thereof by a forged instrument, but his conduct . . .
may estop him from denying its validity.” [Citation.] Here, the evidence indicates that
Velocity’s Deed of Trust was executed on 03/09/17, well before plaintiff’s Complaint
was filed. [Citation.] Plaintiff contends that the property was conveyed without its
consent in September 2015, and that its Note and Deed of Trust contained a due on sale
clause. [Citation.] Yet plaintiff did not discover the September 2015 conveyance until
after the [fraudulent reconveyance] was recorded in March 2017. There is a triable issue
of material fact regarding whether that failure to discover the fraudulent conveyances
earlier was negligent.”

                                              4
              A little over a month after Judge Horn’s ruling, in July 2018, Premier filed
a second lawsuit against Velocity, which we refer to as the “2018 lawsuit,” and which
alleged essentially identical facts. As relevant here, the only significant additional fact
alleged was that, after the pendency of the 2017 lawsuit, Velocity foreclosed on the
Property and purchased it. Premier asserted three causes of action: declaratory relief,
judicial foreclosure on the deed of trust, and equitable relief. As remedies, Premier
sought a declaration that its deed of trust continued to be enforceable against Velocity,
judicial foreclosure, and various forms of equitable relief.
              In connection with the 2018 lawsuit, Premier filed a notice of related case
in which it checked boxes acknowledging that the 2017 lawsuit “involves the same
parties and is based on the same or similar claims,” “arises from the same or substantially
identical transactions, incidents, or events requiring the determination of the same or
substantially identical questions of law or fact,” and “involves claims against, title to,
possession of, or damages to the same property.”
              In answer to the 2018 complaint, Velocity entered a general denial as well
as numerous affirmative defenses. The 24th affirmative defense, which was labeled
“Unlawful ‘Piecemeal Litigation’ and ‘Forum Shopping,’” stated as follows, “This
answering Defendant is informed and believes and thereon alleges that the Plaintiff has
engaged in unlawful ‘piecemeal litigation’ and unlawful ‘forum shopping’ by filing this
Complaint. Rather than seek leave to amend its original Complaint against the named
defendants and others, which was filed on May 15, 2017, in the Orange County Superior
Court, Central Judicial District, as Case No. 30-2017-00920272-CU-FR-CJC, and
assigned to Honorable Frederick P. Horn, the Plaintiff filed this Complaint in the same
county and the same judicial district in order to obtain a different judicial officer despite
both Complaints and all causes of action therein arising out of the same transaction,
occurrence, or series of transactions or occurrences. This answering Defendant further
alleges that ‘the law abhors a multiplicity of actions . . . the obvious intent of the

                                               5
Legislature . . . was to provide for the settlement, in a single action, of all conflicting
claims between the parties arising out of the same transaction. Thus, a party cannot by
negligence or design withhold issues and litigate them in successive action; he may not
split his demands or defenses; he may not submit his case in piecemeal fashion.’ The
primary purpose of avoiding a multiplicity of actions is the elimination of the duplication
of time and effort when the same factual and legal issues are relevant to both claims.”
              Premier then filed a motion for summary adjudication in the 2018 lawsuit,
and Velocity filed a motion for summary judgment. The court granted Premier’s motion
and denied Velocity’s. The court concluded that under the holding of WFG National
Title Inc. Co. v. Wells Fargo Bank, N.A. (2020) 51 Cal.App.5th 881, the forged
reconveyance against Premier was void, and thus Premier’s security interest was superior
to Velocity’s. The court ruled that Premier was entitled to declaratory relief as follows:
“Premier’s Deed of Trust was never reconveyed, the Forged Recon[veyance] is
cancelled, and Premier’s Deed of Trust remains of record as of the date of its original
recording, (2) all of Premier’s rights, duties and obligations under Premier’s Deed of
Trust are superior to any claims of any of the defendants including Velocity’s Deed of
Trust, [and] (3) Premier is entitled to the revenues, income, issues, profits and proceeds
derived from the Property . . . .” After Premier dismissed its remaining causes of action,
the court entered judgment, and Velocity appealed.

                                        DISCUSSION
              Our review of a summary judgment is de novo. (Daneshmand v. City of
San Juan Capistrano (2021) 60 Cal.App.5th 923, 930.) We decline to reach the merits of
the court’s judgment because Premier’s second lawsuit runs afoul of the rule against
splitting a cause of action.

                                               6
              “The primary right theory is a theory of code pleading that has long been
followed in California. It provides that a ‘cause of action’ is comprised of a ‘primary
right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act
by the defendant constituting a breach of that duty. [Citation.] The most salient
characteristic of a primary right is that it is indivisible: the violation of a single primary
right gives rise to but a single cause of action. [Citation.] A pleading that states the
violation of one primary right in two causes of action contravenes the rule against
‘splitting’ a cause of action. [Citation.]
              “As far as its content is concerned, the primary right is simply the
plaintiff’s right to be free from the particular injury suffered. [Citation.] It must
therefore be distinguished from the legal theory on which liability for that injury is
premised: ‘Even where there are multiple legal theories upon which recovery might be
predicated, one injury gives rise to only one claim for relief.’ [Citation.] The primary
right must also be distinguished from the remedy sought: ‘The violation of one primary
right constitutes a single cause of action, though it may entitle the injured party to many
forms of relief, and the relief is not to be confounded with the cause of action, one not
being determinative of the other.’ [Citation.]
              “The primary right theory has a fairly narrow field of application. It is
invoked most often when a plaintiff attempts to divide a primary right and enforce it in
two suits. The theory prevents this result by either of two means: (1) if the first suit is
still pending when the second is filed, the defendant in the second suit may plead that fact
in abatement [citations]; or (2) if the first suit has terminated in a judgment on the merits
adverse to the plaintiff, the defendant in the second suit may set up that judgment as a bar
under the principles of res judicata [citation]. (Crowley v. Katleman (1994) 8 Cal.4th
666, 681-682.)
              This rule applies with full force to the present action. There is no dispute
that the 2018 lawsuit is based on the exact same facts as the 2017 lawsuit. The only

                                               7
difference between the two is the legal theories asserted and the remedies sought.
Accordingly, the 2018 lawsuit violates the rule against splitting a cause of action.
Premier should have sought to amend its complaint in the 2017 lawsuit if it wanted to
                                          3
pursue different theories and remedies.
              Nor has Velocity waived this argument. By statute, this defense may be
raised either by demurrer or by answer: “The party against whom a complaint or cross-
complaint has been filed may object, by demurrer or answer as provided in [Code of
Civil Procedure] Section 430.30, to the pleading on any one or more of the following
grounds:” “There is another action pending between the same parties on the same cause
of action.” (Code Civ. Proc., § 430.10, subd. (c), italics added; see Color-Vue, Inc. v.
Abrams (1996) 44 Cal.App.4th 1599, 1604 [“‘The proper time to raise a plea in
abatement is in the original answer or by demurrer at the time of the answer’”].)
                                                                                4
Velocity’s 24th affirmative defense, recited above, clearly raises this defense. And it
was raised in Velocity’s motion for summary judgment as well. The court did not
explicitly discuss the argument in its ruling, but instead found Velocity’s motion as a
whole had no merit, stating, “[N]one of the five matters cited in [Velocity’s] notice of
motion as reasons for granting the motion cite any of the affirmative defenses contained
in [Velocity’s] Answer or show that [Premier’s] action has no merit.” The court seems to
have been unaware of the 24th affirmative defense.

3
              Premier’s counsel explained that it opted for a second lawsuit because
Velocity’s counsel refused to stipulate to Premier amending the complaint in the 2017
lawsuit. It goes without saying that this refusal did not authorize Premier to file a second
lawsuit on the same cause of action. Premier could have filed a motion to amend, and
Velocity’s counsel even mentioned that it should do just that, stating, “[A]s pr[e]scribed
by law, a motion for leave to file an amended complaint is necessary.”
4
               We are somewhat puzzled as to why Velocity chose not to demur on this
ground, which would have saved substantial time and expense, but that choice did not
result in a waiver.

                                              8
              We realize our disposition of this appeal is unsatisfying in that it leaves the
merits to be decided another day. However, in addition to being legally sound, we deem
it the prudent course because the rule against splitting a cause of action arguably has
jurisdictional implications that could subject the judgment to a collateral attack in the
future. As our high court explained in Williams v. Superior Court (1939) 14 Cal.2d 656,
“The state Constitution [citation] provides for but one superior court in each county . . . .
[J]urisdiction is vested by the Constitution in the court and not in any particular judge or
department thereof . . . . [Citation.] It follows, therefore, that where a proceeding has
been duly assigned for hearing and determination to one department of the superior court
. . . and the proceeding so assigned has not been finally disposed of therein or legally
removed therefrom, it is beyond the jurisdictional authority of another department of the
same court to interfere with the exercise of the power of the department to which the
proceeding has been so assigned. [Citation.] In other words, while one department is
exercising the jurisdiction vested by the Constitution in the superior court of that county,
the other departments thereof are as distinct therefrom as other superior courts.” (Id. at p.
662, italics added; see People v. Gonzalez (1996) 12 Cal.4th 804, 813 [following
Williams, supra, 14 Cal.2d 656].) Rather than run the risk of a future collateral attack,
the wise course is to put the matter on solid procedural footing now, while the facts and
evidence are still fresh in everyone’s mind, and the parties are still available.

                                              9
                                 DISPOSITION

          The judgment is reversed. Velocity shall recover costs on appeal.

                                            SANCHEZ, J.

WE CONCUR:

BEDSWORTH, ACTING P. J.

GOETHALS, J.

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