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Deutsche Bank National Trust Co. v. Pyle

California Court of Appeals, Fourth District, First Division

July 13, 2017

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee, etc., Plaintiff, Cross-defendant and Respondent,
v.
ALAN PYLE et al., Defendants, Cross-complainants and Appellants.

         APPEAL from a judgment of the Superior Court of Riverside County No. PSC1400290, James T. Latting and Randall D. White, Judges. Affirmed.

          Hennelly & Grossfeld and Ronald K. Giller for Defendants, Cross-complainants and Appellants.

          Parker Ibrahim & Berg, John M. Sorich, Bryant Delgadillo and Mariel Gerlt-Ferraro for Plaintiff, Cross-defendant and Respondent.

          NARES, J.

         In OC Interior Services, LLC v. Nationstar Mortgage, LLC (2017) 7 Cal.App.5th 1318 (review den. May 10, 2017) (OC Interior) another panel of this court concluded that a void judgment does not pass title free of the lien purportedly cancelled by the void judgment; rather, "a void judgment in the chain of title has the effect of nullifying a subsequent transfer, including a transfer to a purported bona fide purchaser." (Id. at p. 1335.) In this case, the parties seek to avoid a similar result by arguing that a void default judgment essentially granted quiet title relief. We reject this argument because the void default judgment did not quiet title to the property.

         FACTUAL AND PROCEDURAL BACKGROUND

         The Loan and Lender's Acquisition of the Property

         In 2004 Denise Saluto recorded a grant deed to real property located in Rancho Mirage, California (the Property). In 2005 Saluto obtained a $517, 000 loan on the Property secured by a deed of trust (DOT). The DOT identified Saluto as the borrower and Long Beach Mortgage Company (LBMC) as the lender, beneficiary and trustee. LBMC later merged with Washington Mutual Bank (WaMu), which then became the beneficiary of the loan and DOT, as successor in interest to LBMC. In early 2007 Saluto defaulted on the loan.

         Plaintiff Deutsche Bank National Trust Company, as trustee for Long Beach Mortgage Loan Trust 2005-WL3 (Deutsche Bank) acquired the Property in July 2007 at a trustee's sale for approximately $510, 000, becoming the beneficiary of the loan and DOT. In August 2007 Deutsche Bank recorded its trustee's deed upon sale (the trustee's deed).

         Deutsche Bank sought to gain possession of the Property through an unlawful detainer action, but Saluto filed for bankruptcy protection. On September 25, 2008, JPMorgan Chase Bank, N.A. (JPMorgan), acquired certain assets of WaMu from the Federal Deposit Insurance Corporation, by and through a purchase and assumption agreement, including any interest WaMu had in the loan.

         The Saluto Action

         In February 2009 Saluto, acting in propria persona, sued Deutsche Bank and WaMu Bank, as successor to LBMC, to cancel, set aside and vacate the trustee's deed and cancel the DOT. Saluto alleged that she was the lawful owner of the Property free and clear of the DOT and sought to enjoin Deutsche Bank and WaMu from asserting any ownership or other legal rights or interest in the Property. Saluto did not allege a quiet title claim.

         On December 15, 2009, the trial court entered a default judgment in favor of Saluto canceling and setting aside the trustee's deed and DOT, and enjoining Deutsche Bank and WAMu from asserting any interest in the Property. In March 2010 Saluto recorded the default judgment. That same month, JPMorgan learned of the default judgment when Saluto sought to refinance the Property.

         In June 2010 Deutsche Bank and JPMorgan (as WaMu's successer in interest) filed a motion to set aside the default judgment under Code of Civil Procedure[1] section 473, subdivision (b). The trial court denied the motion as untimely. In December 2010 Deutsche Bank and JPMorgan filed a second motion to set aside the default judgment under section 473.5. The trial court granted the second motion, but this ruling was reversed on appeal. (Saluto v. Deutsche Bank National Trust Company (Apr. 24, 2012, E053221) [nonpub. opn.] (Saluto I).) On July 27, 2012, the decision reinstating the default judgment became final based on the issuance of a remittitur.

         In November 2013 Deutsche Bank and JPMorgan filed a third motion to set aside the default judgment based on extrinsic fraud, alleging that the proofs of service had been falsified and they were never served with the summons and complaint. After holding an evidentiary hearing, the trial court granted the motion finding that Saluto had filed false proofs of service and Deutsche Bank and JPMorgan had never been served with the summons and complaint in the Saluto action. On December 3, 2013, the order setting aside the default judgment was recorded.

         Saluto's Fraud and Sale of the Property

         Before Deutsche Bank purchased the property in July 2007, Saluto recorded a number of documents purporting to convey an interest in the property. Saluto recorded additional documents after Deutsche Bank purchased the property. While the Saluto action was pending, Saluto recorded more documents and sold the property to defendants. JPMorgan, its predecessors, or its agent did not authorize any of these documents. We summarize these interim events here.

         In May 2006 a grant deed was recorded conveying title to the Property from Saluto to SNJ Properties, LLC (SNJ). In November 2006 another grant deed was recorded, wherein title to the Property was conveyed from SNJ to Atistar Mortgage Solutions, LLC (Atistar). In February 2007 Atistar conveyed title to the Property back to SNJ.

         In July 2007 an "Affidavit & Notice of Dissolution of Trust Deed and Merger of Trust Deed into Title of Trust Deed Beneficiary" (Affidavit) was recorded, stating that SNJ transferred its interest in the Property to LBMC and WaMu. The Affidavit purported to dissolve the DOT, without Deutsche Bank's authorization. That same day, another grant deed was recorded, whereby SNJ purported to convey title to LBMC and WaMu.

         In August 2007 Deutsche Bank recorded its trustee's deed. In July 2010 a recorded grant deed purported to convey title to the Property from Saluto to Lillie LTD (Lille). In September 2010 a grant deed was recorded ...


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